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UNIVERSITY 

Of 


y^.'m.<je/.^ 


The  American  Cotton  System 

H  istorically  Treated 


SHOWING  OPERATIONS  OF  THE 
COTTON  EXCHANGES 


Cotton  Classification 


Numerous  Practical  Domestic  and  Foreign 
Commercial  Calculations 


Tells  What  You  Want  to  Know 


ByT.  S.  MILLER,  Sr. 


ILLUSTRATED 


^     Of  THE 

UWIVERSITY 

Of     . 

1909 

AUSTIN   PRINTING   COMPANY 

AUSTIN,  TEXAS 


mmi 


Copyright  1909 
By  T.  S.  MILLER.  Sr. 


O    THE 

UNIVEf^SITY 

Of 


PREFACE. 


It  is  evident  that  beyond  the  limits  of  his  own 
environments  the  average  cotton  grower  is  unac- 
quainted with  the  manner  in  which  his  cotton  finds 
a  market;  that  text  books  enlightening  him  are 
wanting;  that  experience  alone  can  not  teach  him 
the  exact  character  and  quality  of  the  cotton  pro- 
duced on  his  farm,  the  process  of  marketing,  the 
practical  definition  and  application  of  future  con- 
tracts to  spot  markets,  how  to  ascertain  the  value 
of  relative  grades,  and  to  make  the  calculations 
requisite  to  the  transaction,  whether  sold  at  home 
or  in  foreign  markets,  and  to  render  clear  the  mean- 
ing of  all  the  technical  expressions  common  to  the 
cotton  trade  are  some  of  the  manifold  purposes  of 
this  volume. 

Realizing  that  a  work  of  this  kind,  setting  forth 
as  clearly  as  possible  the  way  in  which  cotton  is 
bought  and  sold,  how  the  banking  interests  of  the 
country  are  instrumental  in  handling  and  assisting 
in  the  movement  of  cotton  as  a  co-related  force,  is 
not  only  desirable  but  absolutely  necessary  and 
will  enable  any  student  of  cotton  to  be  educated 
along  the  lines  demanded  by  the  peculiar  cotton  condi- 
tions in  the  South  today. 

Cotton  classification  and  calculations  determining 
the  value  of  the  different  grades  of  cotton  have 
usually  been  confined  to  those  directly  interested 
in  the  trade,  and  has  rendered  this  source  of  infor- 
mation principally  in  the  hands  of  a  few,  while  the 


iv  Preface 

public  has  given  little  thought  to  this  essential 
study. 

To  delineate  the  facts  connected  with  the  cotton 
trade,  stating  the  good  and  evil  alike,  without  min- 
imizing or  exaggerating  has  been  a  determinate 
feature  of  this  work. 

The  history  and  development,  of  the  cotton  plant 
has  been  previously  written  in  detail  by  numerous 
writers,  but  a  brief  sketch  is  inserted  here  for  the 
purpose  of  placing  this  data  in  condensed  form  for 
convenient  reference. 

While  ''the  half  has  not  been  told,"  the  amount  and 
character  of  matter  placed  at  the  disposal  of  the 
student,  is  presumed  to  give  him  a  clear  and  com- 
prehensive explanation  of  the  manner  in  which  the 
great  American  cotton  crops  find  a  market. 

A  large  portion  of  tliis  volume  is -drawn  from  the 
author  ^s  own  personal  experience  from  practical 
work  in  the  cotton  market,  though  in  a  limited 
Avay,  covering  a  period  of  something  near  fifteen 
years,  during  which  time  he  has  been  a  close  student 
of  the  cotton  question  in  all  its  intricate  details, 
seeking  through  every  available  source,  reliable  in- 
formation and  data  that  could  be  construed  as  suit- 
able and  worthy  to  be  perpetuated  and  is  herein 
presented  to  the  studious  who  are  interested  in  cot- 
ton. 

To  the  thousands  of  operators  in  the  South  who 
have  a  fair  practical  knowledge  of  classification,  but 
who  are  not  fully  conversant  with  cotton  calcula- 
tions, this  work  will  have  a  special  value. 

It  is  thought  advisable  to  give  solutions  of  a  large 
number    of    mathematical    problems,    from    the    sini- 


Preface  v 

plest  to  the  most  abstruse  as  the  intention  of  the  \/ork 
is  to  be  practical  and  easy  of  reference. 

The  problems  are  original,  practical,  covering 
such  ground  as  will  be  found  useful  to  the  cotton 
grower,  dealer,  large  or  small,  as  well  as  the  ex- 
porter. 

The  problems  dt^tailing  processes  used  by  operat- 
ors dealing  extensively  in  domestic  and  foreign  cot- 
ton, are  inserted  to  acquaint  those  entirely  unfa- 
miliar with  such  operations. 

Finding*  the  average  grade  by  the  use  of  the  six- 
teenth or  6  1-4  point  method  is  here  introduced^, 
the  author  believes,  for  the  first  time  in  print,  and 
will  prove  both  novel  and  instructive.  The  results 
to  be  gained  by  this  method,  while  not  absolutely 
correct,  are  sufficiently  near  to  be  practical,  and  is 
a  method  used  almost  entirely  by  operators  every- 
where. Its  beauty  lies  in  the  fact  of  its  close  ap- 
proximation to  accuracy  and  its  brevity  in  opera- 
tions, rendering  the  averaging  of  large  lists  of  cot- 
ton quite  as  easy  as  small  ones. 

Agriculture  as  a  supplemental  branch  of  study 
is  now  being  introduced  in  the  primary  schools  of 
the  country,  and  especially  in  Texas,  the  Arithmetic 
of  Cotton  as  a  special  chapter  of  this  volume  should 
appeal  to  every  teacher  in  this  State  and  the  entire 
South ;  in  fact,  to  all  directly  or  indirectly  connected 
with  cotton,  whether  grower  or  dealer,  who  does 
not  understand  cotton  calculations. 

Teachers  desiring  to  introduce  cotton  calculations 
into  their  schools  as  an  auxiliary  study  should  secure 
at  least  five  grades  of  cotton  from  some  cotton 
buyer  or  classer  in  their  county,  to  be  used  in  con- 


vi  Preface 

nection  with  the  calculations,  that  this  class  of  work 
may  be  better  exemplified  to  the  pupils. 

It  is  suggested  that  the  grades,  low  middling,  strict 
low  middling,  middling,  strict  middling  and  good 
middling  be  secured  as  the  best  types  for  easy  repre- 
sentation. Such  practical  work  in  the  school  room 
should  prove  interesting  and  instructive. 

The  author  is  deeply  indebted  to  Hons.  R.  L. 
Henry  and  A.  S.  Burleson  for  literature  furnished 
by  them ;  for  information  covering  the  utility  of  the 
Cotton  Factor  as  an  element  in  the  cotton  trade  his 
thanks  are  due  Mr.  Dan  Kempner,  Galveston,  Texas ; 
he  wishes,  also,  to  thank  Mr.  W.  J.  Neale,  Waco, 
Texas,  for  kindly  reviewing  the  chapter  on  Buying 
and  Selling  Spot  Cotton ;  he  appreciates  the  kindness 
of  Messrs.  S.  C.  Alexander  &  Co.,  Pine  Bluff,  Ark., 
in  giving  their  definition  of  ^^ Bender  Cotton.'' 

Concerning  the  ** inner  workings"  of  the  New 
Orleans  Cotton  Exchange  he  is  appreciatively  grate- 
ful to  Messrs.  Haywood  &  Clark,  members  of  that 
exchange ;  for  literature  in  defense  of  the  New  York 
Cotton  Exchange  and  statistics  he  gratefully  ac- 
knowledges the  courtesies  of  Messrs.  Latham  Alexan- 
der &  Co.,  members  of  that  organization;  for  assist- 
ance in  giving  information  regarding  the  handling 
of  American  cotton  in  European  countries,  he  desires 
to  thank  Mr.  Anton  Ouenther,  of  Bremen,  Germany, 
for  data  fully  explanatory  furnished  by  him. 

Other  helpful  sources  from  which  materials  have 
been  drawn  and  for  which  due  credit  is  given  are 
indicated  in  the  following: 

Prescott's  ''American  Encyclopedia";  ''Encyclo- 
pedia   Britanica";    "Book    of   the    United    States"; 


Preface 


vu 


''Cotton  Movement  and  Fluctuation,"  Latham  Alex- 
ander &  Co.;  Watkin's  ''King  Cotton'';  "United 
States  Dispensatory''  edition  1873;  Pereira's  "Ma- 
teria Medica,"  edition  1854;  Maury's  Geography. 

Crop  Eeporter  and  Annual  Year  Book  of  the 
United  States ;  Census  Bulletins  of  the  United  States 
Agricultural  Departments,  kindly  furnished  by  Mr. 
S.  N.  D.  North;  Consular  Eeports  and  Reports  of 
the  Commission  of  Corporations  on  Cotton  Ex- 
changes ;  Constitution  and  By-Laws  of  the  New  York, 
New  Orleans  and  Bremen  Cotton  Exchanges. 

In  submitting  this  volume  to  the  public  the  author 
is  fully  aware  of  its  imperfections  and  desires  that 
all  criticisms  be  addressed  to  him  that  he  may  amend 
or  correct  in  subsequent  editions. 

Thomas  Southworth  Miller,  Sr. 

Flat,  Texas,  November  8,  1909, 


CONTENTS. 

PAGE 

CHAPTER  I 1 

COTTON — HISTORY — BOTANICAL  CHARACTERISTICS 
— WESTERN  OR  AMERICAN  COTTONS — GOSSYPIUM 
HERBACEIUM — GOSSYPIUM     HIRSUTUM — SPINNING 

VALUES  OF  COTTON SEA-ISLAND  COTTON    (G.  BAR- 

BADENSE) LONG  STAPLE  UPLAND  COTTON- 
SHORT  STAPLE  WESTERN  COTTON — COTTONS  OF 
BRAZIL,  PERU,  MEXICO,  BRITISH  INDIA,  EGYPT, 
RUSSIA,  CHINA,  JAPAN,  OTHER  COUNTRIES,  BRIT- 
ISH NORTH  BORNEO,  COTTON  AREA  OF  THE  WORLD 
AND  THE  UNITED  STATES — EARLY  EXPERIMENTS 
IN  THE  UNITED  STATES. 

CHAPTER  II 35 

COTTON  CLASSIFICATION NO  MECHANICAL  MEANS 

— MIDDLING  COTTON SAMPLES  DRAWN  FOR  CLAS- 
SIFICATION  INTENTIONAL     PLATING     CONDEMNED 

— DRY      COTTON — PREMIUM      VALUES      OFFERED 

LOWER  GRADES  MORE  DIFFICULT — STAPLE   COTTON 

RELATIVE      GRADES GRADES      TENDERABLE      ON 

CONTRACTS DIFFERENCES REVISION    COMMITTEE 

OF     THE     NEW     YORK    EXCHANGE HOW     COTTON 

MARKETS  ARE  MADE — ^EXCHANGE  MARKET  QUO- 
TATIONS. 

CHAPTER  III 63 

EXCHANGES — ORIGIN  OF — N.  Y.  COTTON  EXCHANGE 
CONTRACT — N.  O.  COTTON  EXCHANGE  CONTRACT — 
ANALYSIS  COTTON  EXCHANGE  BUSINESS — ^BUCKET 
SHOPS ORIGIN    OF TRANSACTIONS    ALLEGED    LE- 


X  Contents 

PAGE 
GITIMATE  ON  THE  COTTON  EXCHANGE — CONTRACT 
BASIS — HEDGING  FUTURE  AND  SPOT  COTTON — HOW 
TO     BUY     OR     SELL     A     FUTURE     CONTRACT — SPOT 
HOUSES   REFUGE. 

CHAPTER  IV 102 

BUYING  SPOT  COTTON — A  REPRESENTATIVE  COTTON 
FIRM — CONTRIBUTORY  TERRITORY — CONCENTRA- 
TION— ^BUYING  WITHOUT  ORDERS — COTTON  GUAR- 
ANTEES— CENTRAL  BUYING  POINTS — SHORT  SELL- 
ING SPOT  COTTON — ARGUMENT  FAVORING  SHORT 
SELLING  CRITICISED COTTON  WRAPPINGS — CON- 
SULAR  REPORTS ROUND   BALE. 

CHAPTER  V 138 

ARITHMETIC   OF    COTTON ARITHMETICAL   SIGNS 

DECIMAL  FRACTIONS — DECIMAL  AND  COMMON 
FRACTION  TABLE — ^DECIMAL  SUBTRACTION,  MUL- 
TIPLICATION, DIVISION — TABLE  OF  POINTS — COM- 
MON   FRACTIONS    WITH    DECIMAL    EQUIVALENTS 

EXAMPLES  INVOLVING  USE  OF  THE  CENT,  1?^,  1/4, 
VSy   tV,    A- 

CHAPTER  VI 192 

BASIC    COTTON     CALCULATIONS ABBREVIATIONS 

TERMS,  LONG  COTTON,  SPOT  COTTON,  SHORT  COT- 
TON, OR  SHORTS,  BEAR,  BEARS,  BULL,  BULLS,  POINT, 
MARKET  OPENS,  MARKET  CLOSES,  FUTURES,  CON- 
TRACTS, MARGINS,  PREMIUMS,  DISCOUNTS,  PARITY, 
HEDGING,  STRADDLES  OR  SPREADS,  SCAI.PERS, 
SPLITS,  FLAT  COTTON,  SHIPPERS '  ORDER  NOTIFY, 
COTTON  FACTORS,  BROKER,  BROKERAGE,  RECLAMA- 
TIONS, INVOICE,  DRAFTS,  BILL  OF  LADING,  DOMES- 
TIC, THROUGH  BILL  OP  LADING,  PORT  BILL  OF  LAD- 
ING, ARBITRATORS  AND  ARBITRATIONS — ^REQUISITES 


CJONTENTS  xi 

PAGE 
FOR     CAIjCULATIONS — GRADES,     CHARACTERS     AND 
INITIALS — ^PROBLEMS. 

CHAPTER  VII 239 

CHECKS  AND  DRAFTS ^EXCHANGE SIGHT  DRAFTS 

— TIME  DRAFTS — ^PROBLEMS — INDIRECT  EXCHANGE 
— FOREIGN  EXCHANGE — MONETARY  STANDARDS — 
EXCHANGE  ON  ENGLAND,  FRANCE,  GERMANY — 
AMERICAN-GERMAN  AND  GERM  AN- AMERICAN 
WEIGHTS — METRIC  MEASUREMENTS — ^PROBLEMS — 
CALCULATIONS^  FOR  COTTON  QUOTATIONS — PRI- 
MARY BASIS  PRICE — ^PROBLEMS. 


DEDICATED 

to 

My  Wife. 

Mu  jgritr^  Mfiitr 

as  a 
TOKEN  OF  LOVE  AND  AFFECTION 

and 

For  her  Valuable  Assistance 

in  Compilinjr  this  Work 


Of   THE 


CHAPTER  I. 


ERRATA. 


Foot  note  on  page  62  should  read  page  193. 
Asterisk  on  page  101  should  be  at  end  of  last  line  of 
second   paragraph. 


Answer 

to  problem 


1  G.M.  in 


4, 

7, 


page   177  should  be 

7,  "       179 

8,  "       180 
5,      "       188 

4,  '•  210 
13,  ''  213 
16,      "       213 

9,  "       265 

5,  "       256 
223 

Eighteenth  line,  page  272,  sixth  word  should  be   241. 

Ninth  line,  page  27  8,  third  word,  should  be  4.80  (ex- 
change rate). 

Twenty-fourth  line,  page  280,  second  word,  should  be 
4.93  pence. 

The  author  regrets  the  appearance  of  these  errors — 
they  will  be  corrected  in  subsequent  issues. 


$147.84 
$34.45 
$515.32 
$132.79 
$1082.871 
$4.76  + 
$70.37J     • 
113,293.04+  yen 
$3896.14  + 
2   G.   M. 


stare  apprehensively,  when  its  limbs  are  ladened 
with  fruit,  they  beam  with  delight  and  a  consolation 
pervades  every  artery  of  trade,  knowing  that  a  new 
fabric  for  the  use  of  mankind  can  soon  be  made. 

This  plant  which  supplies  the  raw  material  for 
one  of  the  great  industries,  and  for  the  clothing  of 
all  nations,  may  be  ranked  as  one  of  nature's  most 
valuable  gifts  to  mankind. 

From  the  shadows  of  the  remote  past,  no  definite 
1 


(     ^     Of   THE  ■ 


CHAPTER  L 

COTTON. 

As  an  agricultural  product,  an  article  of  com. 
merce  and  revenue,  cotton  stands  pre-eminent  in 
the  minds  of  the  agriculturist  of  the  South.  It  is 
to  it  he  looks  to  lift  his  mortgage,  pay  his  debts, 
build  his  home,  improve  his  farm,  clothe  his  family, 
provide  for  his  household,  school  his  children  and 
secure  a  bank  credit,  but  to  some  or  all  of  these,  he 
is  often  confronted  with  disappointment,  owing  to 
the  many  jeopardizing  influences  that  attack  the 
cotton  plant,  assail  the  cotton  market  and  minimize 
his  efforts. 

HIS'tORY. 

It  is  natural  that  we  should  wish  to  know  some- 
thing of  the  origin  and  history  of  the  plant  that 
wraps  the  human  race,  moves  the  wheels  of  com- 
merce and  controls  the  finances  of  a  nation,  when 
whose  leaves  wither,  the  eyes  of  a  financial  world 
stare  apprehensively,  when  its  limbs  are  ladened 
with  fruit,  they  beam  with  delight  and  a  consolation 
pervades  every  artery  of  trade,  knowing  that  a  new 
fabric  for  the  use  of  mankind  can  soon  be  made. 

This  plant  which  supplies  the  raw  material  for 
one  of  the  great  industries,  and  for  the  clothing  of 
all  nations,  may  be  ranked  as  one  of  nature's  most 
valuable  gifts  to  mankind. 

From  the  shadows  of  the  remote  past,  no  definite 

1 


2  The  American  Cotton  System 

knowledge  has  come  down  to  us,  as  to  who  first 
mentioned  cotton.  That  the  ancients  were  familiar 
with  its  uses  before  the  Christian  era  is  certain,  and 
is  quoted  by  nearly  all  writers  on  the  subject  in  mod- 
em times. 

Herodotus,  the  Greek  historian,  who  lived  in  the 
fifth  century  B.  C.  makes  particular  note  of  this 
plant  in  India,  comparing  the  beauty  and  usefulness 
of  the  ^'fleeces  of  its  fruit"  as  surpassing  that  of 
''lamb's  wool,"  and  from  which  the  people  were 
clothed. 

Pliny  mentions  it,  and,  also,  a  cloth  (Xylina)  made 
from  its  fiber,  yet  its  history,  like  that  of  ancient 
Greece,  has  a  Fabulous  Period,  so  interwoven  with 
fable  that  its  identity  is  almost  lost  in  stories  told 
by  over  credulous  travelers,  in  oriental  countries. 

Authentic  history  finally  relegated  to  the  pages  of 
mythical  lore  all  the  impractical  and  untrue  at- 
tributes of  this  truly  wonderful  plant,  and  we  find 
that  cotton  was  grown  in  India,  for  the  making  of 
clothing,  at  a  very  early  period,  from  thence  it 
probably  found  its  way  to  China,  next  to  Persia  and 
afterward  to  other  countries ;  that  it  was  known  and 
cultivated  in  Egypt,  at  a  period  almost  as  early; 
and  that,  when  the  Americas  were  first  explored, 
the  natives  were  found  to  be  accustomed  to  the  cul-^ 
tivation  of  cotton  and  its  manufacture  into  cloth. 

Cotton  is,  therefore,  indigenous  to  all  tropical  and 
semi-tropical  regions  of  the  world,  though,  a  higher 
state  of  development  is  reached  where  soil  and  cli- 
matic conditions  are  most  congenial,  and  where  proper 
tillage  fosters  its  growth. 


Cotton  History  3 

botanical  characteristics. 

Gossypium  : 

The  chief  botanical  types  are:  1  Gos.  Barba- 
dense;  2  Gos.  Herbaceum;  3  Gos.  Hirsutum;  4  Gos. 
Arboreum;  5  Gos.  Peruvianum.  (See  Encyclopedia 
Britannica. ) 

Botanically,  cotton  is  classed  in  the  natural  order 
Malvaceae,*  under  the  name  Gossypium, — ^this  name 
(Gosypion)  having  been  given  it  by  Pliny,  though 
his  reason  for  so  doing  has  never  been  fully  under- 
stood. 

This  genus,  Gossypium,  has  caused  much  perplex- 
ity and  diversity  of  opinion  among  botanists,  owing 
to  the  facts  that  the  plant  is  susceptible  to  changes 
caused  by  climatic  conditions,  soil  and  cultivation; 
also,  the  more  eccentric  changes  known  as  ''sports,*' 
which  leave  the  genealogy  of  the  different  species 
still  involved  in  doubt.  Linnaeus  admitted  five 
species,  while  other  subsequent  botanists  have  recog- 
nized four  or  five  times  as  many. 

Professor  Parlatore  in  his  description  of  the  cot- 
tons he  had  seen  growing  in  Italy  was  led  to  the  con- 
clusion that  there  were  only  seven  species  of  cotton, 
all  others  being  varieties. 

While  De  Candolle,  Dr.  Royle,  Schwartz  and 
others,  particularizing  admit  a  different  number  of 
original  species,  it  is  probable,  that  the  cottons  of 
the  Old  and  those  of  the  New  World  constitute  the 
real  typical  divisions  known  to  commerce — these 
are  the  Eastern  and  Western,  the  Indian  and  Ameri- 
can cottons. 


♦Order  of  the  common  Mallows. 


4  The  American  Cotton  System 

The  botanical  characteristics  of  the  two,  while  in 
a  degree  are  similar,  yet  are  sufficiently  marked  so 
that  thft  one  can  not  be  mistaken  for  the  other. 

The  seed  of  the  Eastern  plant  is  never  black  or 
naked,  while  many  varieties  of  the  Western  plant 
are  conspicuously  so.  Numerous  varieties  of  each 
type  are  to  be  found  constituting  distinct  races  of 
the  same  species,  which  augmented  by  the  indus- 
trious bees  and  other  insects  with  their  pollenizing 
visits,  affords  ample  scope  for  the  origination  of  ap- 
parently new  cottons,  the  character  of  which  are 
so  pronounced  as  to  good  qualities  or  want  of  them, 
that  careful  experimenters  desiring  to  improve  the 
one  or  to  destroy  the  other,  have  ample  opportuni- 
ties along  this  line  of  endeavor. 

All  of  the  Eastern  varieties  belong  to  the  species 
designated  by  Linnaeus,  yet  are  clearly  distinguish- 
able from  each  other,  with  one  exception,  and  that 
is  the  single  purple  blossomed  tree  cotton,  indigen- 
ous  to  the  lands  bordering  the  Indian  Ocean;  the 
Gossypium  Arboreum  of  Linnaeus;  the  Deo  Cotton 
held  sacred  by  the  Hindus.  This  plant  or  tree  has 
dark  green  leaves,  red-purple  blossoms  and  produces 
a  silky  fiber,  which  is  used  for  making  priestly  vest- 
ments alone. 

Attempts  have  been  made  to  hybridize  this  cotton 
and  bring  it  into  general  use,  but  so  far  without  suc- 
cess and  it  remains  commercially  unknown. 

WESTERN  OR  AMERICAN   COTTONS. 

In  1519  when  Cortez  first  essayed  to  visit  the 
g:^at  Montezuma  in  his  capital  city  of  Mexico,  he 


Cotton  History  5 

was  presented  with  a  princely  gift  of  immense  value, 
a  part  of  which  ^^  consisted  of  loads  of  finely  wrought 
cotton,''  and  when  the  Spaniards  were  finally  re- 
ceived into  the  royal  presence,  ^^ '  attendants  strewed 
the  ground  with  cotton  tapestry  that  his  imperial 
feet  might  not  be  contaminated  by  the  rude  soil." 
The  cotton  hangings  in  their  quarters  were  the  won- 
der and  admiration  of  these  adventurous  soldiers. 
The  common  people  wore  cotton  shirts  and  Monte- 
zuma's ''great  square  cloak  made  of  finest  cotton  and 
sprinkled  with  jewels,"  still  lives  in  the  f>ages  of 
his  chroniclers. 

l<'rom  early  records  it  will  be  seen  that  cotton  was 
grown  abundantly  in  Mexico  previous  to  the  advent 
of  the  Spaniard  there,  and  its  uses  and  manufacture 
were  well  understood  by  the  Aztecs,  that  the  *^In- 
dians  roaming  over  the  undulating  prairies  of  Texas 
were  blanketed  and  clad  in  garments  of  cotton,  and 
that  this  plant  was,  also,  ''found  growing  wild  in 
Florida  and  elsewhere  in  the  South,"  it  is  not  as- 
suming too  much  for  America  to  assert  that  cotton 
is  indigenous  to  the  Southern  portion  of  this  con- 
tinent. 

The  cottons  which  have  become  known  to  the 
civilized  world  since  the  discovery  of  America,  con- 
sists of  two  great  divisions.  The  G.  Barbadense,  a 
black-seeded  variety  with  its  "pure  yellow  blos- 
soms" and  the  G.  Hirsutum,  or  "hairy  cotton"  bear- 
ing "white   or  faintly  primrose-colored  blossoms." 


*See  Prescott's  American  Encyclopedia,  page  427. 
♦*Watkiii'8  "King  Cotton,"  page  10. 


6  The  American  Cotton  System 

The  two  are  not  always  readily  distinguished  from 
each  other  by  the  appearance  of  the  seed,  as  the 
black-seeded  varieties  occasionally  show  seed  which 
have  tufts  of  fiber  at  one  or  both  ends,  and  in  some 
instances  completely  covered  with  fuzz,  and  the 
fuzzy  kind  many  times  show  black  or  naked  seed 
predominating  to  a  more  or  less  extent,  and  on  this 
account  some  authorities  conclude  that  the  two  va- 
rieties belong  to  the  same  species.  Carefully  con- 
ducted investigations  have  shown,  however,  that  the 
variations  in  the  seed  may  be  attributed  to  the  pecu- 
liarities of  soil,  of  climate  and  cultivation,  and  that 
the  specific  characteristics  of  the  two  classes  remain 
distinct  after  generations  and  generations. 

The  cottons  mostly  in  demand  and  sought  after 
by  manufacturers  of  today,  are  those  of  the  Western 
Hemisphere,  designated  as  Sea-island  and  New  Or- 
leans or  Uplands,  or  long  and  short  staple.  Two 
varieties  not  equalled  by  any  other  like  products  of 
the  world. 

SEA-ISLAND    COTTON. 

G.  Barbadense — Sea-Island  Cotton — is  said  to  have 
sprung  from  G.  Arboreum*  in  Persia,  and  was  car- 
ried to  Barbadoes  from  India,  though  the  name 
would  seem  to  imply  a  Barbadensian  origin.  From 
the  island  of  Anguilla  in  1785  to  Bahama  Islands,  it 
was  brought  to  the  United  States  in  1786  where  it 
was  first  grown  on  St.  Simon  ^s  Island  which  is  now 
a  part  of  Glynn  County,  Georgia.  The  culture  and 
improvement  of  sea-island  cotton  were  greatly  aided 


*This  origin  is  doubtful,  but  more  likely  from  Barbadoes. 


Cotton  History  7 

by  the  efforts  of  *Kinsey  Burden  and  wife  of  Colle- 
ton Count3%  Georgia,  who,  by  careful  selection  of  the 
bk,ck  seed  produced  the  best  varieties  now  grown 
in  the  United  States. 

The  islands  lying  off  the  coast  of  Georgia  and  a 
few  interior  counties,  some  portions  of  Florida  and 
South  Carolina  furnish  a  home  in  which  the  Sea-Is- 
land varieties  attain  their  greatest  perfection.  The 
cultivation  of  this  cotton  in  the  United  States  is  now 
principally  confined  to  about  sixteen  counties  in 
Florida,  twenty-nine  in  Georgia,  and  four  in  South 
Carolina,  while  these  particular  counties  grow  this 
kind  of  cotton,  not  all  of  their  areas  are  given  to  its 
culture,  but  only  those  parts  more  particularly 
adapted  to  its  perfect  development,  where  frost  is 
scarcely  known  and  where  it  has  surpassed  all  other 
cottons  for  length,  strength  and  beauty  of  its  lus- 
trous staple,  a  single  pound  of  which  could  be  spun 
into  a  thread  more  than  1000  miles  in  length.  This 
fiber  is  much  in  demand  by  manufacturers  whose 
fabrics  require  a  long  staple  cotton,  though,  it  is  now 
closely  approached  by  some  hybridized  varieties  of 
long  staple  up-land  cotton  originated  in  Mississippi. 

Farmers  who  grow  Sea-Island  cotton  in  the  in- 
terior counties,  necessarily  secure  new  seed,  as  a 
means  of  preserving  the  identity  of  the  original  pa- 


***In  1790  the  first  commercial  quantity  of  this  cotton 
was  grown  by  William  Elliott,  on  the  land  where  Jean 
Ribault  landed  his  first  colonist  and  claimed  the  country 
for  France." 

*Cotton  production,  1907.  Bulletin  95,  page  19,  Dept. 
Com.  and  La.,  B.  of  C. 


8  The  American  Cotton  System 

rental  stock,  as  the  fiber  degenerates  rapidly  into 
that  of  short  staple  up-land. 

Efforts  have  been  made  to  grow  this  cotton  in 
many  parts  of  the  Southern  States,  but  results  have 
been  so  unsatisfactory  that  experiments  in  this  di- 
rection have  almost  ceased. 

Frequent  attempts  to  grow  this  cotton  have  been 
made  in  Texas,  the  first  effort  in  1878  resulted  in 
202  bales  of  fairly  good  staple  being  gathered.  An- 
nually thereafter  some  twenty  bales  were  grown,  un- 
til 1884,  when  the  production  shrank  to  only  eleven 
bales,  then  ceased  until  1895,  when  seed  was  again 
secured  from  Savannah  parties,  from  which  a  crop 
of  991  bales  were  reported;  in  1896,  2,597  bales,  in 
1897,  10  bales  and  in  1899,  6  bales,  the  last  year 
reported. 

The  increasing  demand  for  long  staple  cotton  has 
induced  many  progressive  farmers  and  others  in- 
terested in  producing  long  staples,  to  experiment  in 
many  ways  with  upland  varieties,  to  produce  a  bet- 
ter and  longer  fiber,  chief  of  which  is  in  seed  selec- 
tion, better  and  more  scientific  cultivation,  and 
proper  fertilizatioi;i. 

Sea-Island  cotton  has  been  successfully  introduced 
into  Queensland,  the  Fiji  Islands,  Tahiti  and  Egypt, 
but  the  results  accruing  therefrom  have  not  been  of 
sufficient  magnitude  to  affect  the  cotton  trade  to  any 
appreciable  extent. 

LONG  STAPLE  UPLAND   COTTON. 

The  Bureau  of  Plant  Industry  of  the  United  States 
Department  of  Agriculture,  has  been  and  is  now  giv- 
ing much  valuable  assistance  in  directing  the  grow- 


Cotton  History  9 

ers  attention  to  practical  and  scientific  culture  of 
the  cotton  plant  with  a  view  of  more  particularly  de- 
veloping better  staple  varieties,  and  improving  those 
now  cultivated. 

The  long  staple  uplands  grow  principally  in  the 
lower  portion  of  the  Mississippi  valley,  and  by  care- 
ful seed. selection  of  these  fancy  varieties,  and  more 
intelligent  cultural  methods,  satisfactory  results  have 
been  shown. 

As  most  all  the  American  long  staple  uplands  are 
ginned  by  saw  gins,  the  fibres  are  badly  cut  and 
broken,  making  uneven  lengths  rendering  the  grow- 
ers' efforts  unsatisfactory  to  a  great  extent,  while 
Sea-Island  and  Egyptian  cottons  are  treated  by  rol- 
ler gins  which  give  a  regular  and  more  uniform 
fiber. 

Stimulated  by  offerings  of  fancy  prices  for  long 
staple  cotton,  with  the  assistance  of  the  National 
and  State  Agricultural  Departments  augmented  by 
individual  efforts,  no  doubt  a  variety  suitable  to  all 
climates  and  soils  of  the  Southern  States  will  be 
developed  to  that  extent  its  growth  will  become  uni- 
versal, and  roller  gins  will  be  erected  independently 
or  attached  to  those  in  operation  at  all  points  neces- 
sary to  the  better  care  for  this  class  of  cotton. 

From  the  gratifying  success  attained  on  the  fertile 
Mississippi  valley  lands,  from  which  upland  seed 
have  been  distributed  to  many  other  points,  some 
even  to  remote  distances,  equally  as  good  quality  of 
cotton  has  resulted  from  the  planting  of  these  seeds. 

A  different  character  of  cotton  from  that  just 
described  but  seemingly  confined  to  the  limits  of  the 
State  of  Arkansas,  whose  staple  is  strong,  heavy,  of 


10  The  American  Cotton  System 

good  body,  pulling  full  1  1-8  inch  frequently,  and 
known  as  ''Bender  cotton''  or  Benders  from  the 
fact  of  its  growth  apparently  being  indigenous  to 
the  very  rich  lands  of  that  State  bordering  the  riv- 
ers, especially  the  areas  partially  enclosed  in  the 
river  bends,  but  as  to  the  true  history  of  the  origin 
of  this  variety  of  cotton,  the  efforts  of  the  author  to 
trace  it  beyond  the  ''river  bend"  idea  have  been 
without  success. 

SHORT    STAPLE    WESTERN    COTTON.  j 

Of  the  short  staple  or  Western  variety  of  cotton, 
little  is  known  of  its  origin  though  it  is  quite  prob- 
able it  came  from  Mexico,  and  of  this  class  we  can 
with  certainty  recognize  two  distinct  types ;  one 
with  green  seeds  and  a  hardy  constitution,  the  other 
with  white,  tawny,  or  grayish  seeds,  showing  a  staple 
longer  and  distinctly  silky  in  texture;  these  two 
types  are  the  principal  productions  of  the  United 
States  and  are  known  in  England  and  in  European 
markets  as  "American  Cottons.'* 

While  the  two  classes  enumerated  constitute  the 
principal  ones,  there  are  others  so  closely  allied  that 
it  is  quite  difficult  to  clearly  distinguish  them  as 
separate  species,  but  showing  so  marked  features 
for  the  one  or  the  other  class  as  to  be  more  or  less 
akin.  Of  the  grayish-seed  variety,  two  kinds  are 
found,  one  with  a  small  seed,  while  the  other  is  very 
large,  and  the  same  may  be  said  of  the  green-seeded 
plant,  also.  The  fine  Venezulean  and  West  Indian 
cottons  belong  to  this  latter  class. 

A  variety  supposed  to  have  originated  in  Cuba, 
making  in  suitable  soil   and  climate  a  fine  showy 


Cotton  History  11 

plant,  is  often  found  growing  spontaneously  with 
other  cotton,  producing  a  brown  or  yellow-brownish 
fiber,  known  as  nankeen,  is  frequently  met  with 
upon  the  cotton  farms  of  the  Southern  planter.  Its 
fiber  is  coarse  and  short,  varying  from  five-eighths 
to  three-quarters  of  an  inch  in  length,  but  is  never 
grown  now  as  a  distinct  variety. 

BRAZIL  ^S    cottons. 

Occupying  the  most  considerable  part  of  the  area 
designated  as  the  Valley  of  the  Amazon,  it  is  the 
most  important  country  in  South  America,  and  nat- 
ure seems  to  have  lavished  the  best  gifts  of  her  hand 
in  bestowing  upon  Brazil  a  tropical  and  semitropical 
climate,  varying  according  to  altitude,  a  plentiful 
supply  of  moisture  wrung  by  the  snow-clad  Andes 
from  the  north-east  and  south-east  tradewinds  which 
come  from  the  sea,  a  rich  alluvial  soil,  and  a  long, 
dry  season  for  gathering  the  cotton  crop,  requiring 
improved  industrial  and  scientific  methods  alone 
to  make  this  one  of  the  finest  cotton  growing  coun- 
tries of  the  world. 

Nothing  is  known  definitely  of  the  antiquity  of 
the  cotton  plant  in  Brazil,  but  the  earliest  historians 
of  the  sixteenth  century  mention  the  plant  and  its 
uses  as  being  well  known  to  the  ancient  people  in- 
habiting the  Valley  of  the  Amazon,  and  there  is 
abundant  evidence  that  cotton  had  long  been  used 
by  the  natives  at  the  time  of  the  Spanish  invasion 
of  the  country  in  1500,  however,  no  records  exist  of 
the  exportation  of  cotton  from  this  country  until 
late  in  the  eighteenth  century,  when  some  mention 


12  The  American  Cotton  System 

is  made  of  shipments  of  eottoii  to  Portugal  in  1778, 
and  to  England  in  1781. 

Both  Herbaceous  and  Tree  cottons  are  grown  in 
Brazil,  and  there  are  other  indigenous  species  attain- 
ing a  height  of  from  10  to  15  feet,  which  yield  fair 
crops  for  several  years  in  succession.  Practically 
all  the  present  crop  is  grown  in  the  valley  of  the 
San  Francisco  river,  though  a  large  area  of  Bra- 
zil is  adapted  to  the  culture  of  the  cotton  plant. 

The  cultural  methods  of  the  country  differ  wide- 
ly from  those  employed  by  cotton  planters  in  the 
United  States,  and  in  comparison,  are  extremely 
crude  and  primitive,  but  scant  preparation  of  the 
soil  is  made  for  the  cultivated  species  the  use  of 
the  plow  being  little  known,  the  first  requisite  being 
to  '*bum  off  the  woods  and  plant  the  seed  at  the 
proper  time,"  the  simple  culture  following  consists 
in  the  use  of  the  hoe  ^4n  chopping  out  weeds  and 
cutting  the  sprouts  three  or  four  times  a  year  dur- 
ing the  growing  season." 

The  roller  gin  is  employed  more  extensively  than 
any  other  kind  in  Brazil,  producing  a  more  uniform 
fiber,  though  little  ingenuity  is  manifested  in  the 
manufacture  of  the  presses,  hence  they  are  rude, 
operated  by  hand  principally,  making  a  light  bale, 
averaging  about  250  pounds  weight.  A  large  part 
of  the  cotton  is  consumed  in  that  country.  The  old- 
fashioned  spindle  and  distaff  being  used  to  draw  it 
into  threads.  While  a  part  of  it  goes  into  local 
mills,  which  are  increasing  in  number  annually,  and 
aiding  in  the  manufacture  of  fabrics  for  local  con- 
sumption. 

In  1904  the  Brazilian  mills  consumed  about  135,- 


Cotton  History  13 

000  bales  of  500  pounds  each.  The  production  had 
increased  in  1906  to  275,000  bales,  which  increase 
seems  to  have  made  no  gain  on  the  requirements  of 
the  people,  as  we  have  no  record  of  any  exportation 
to  foreign  mills  during  this  time. 

COTTON  CULTURE  IN  PERU. 

That  cotton  is  indigenous  to  Peru  will  scarcely 
admit  of  a  doubt,  for  early  in  the  sixteenth  century, 
when  the  Spanish  invaders  conquered  the  country, 
the  natives  were  found  to  be  accustomed  to  the  cul- 
ture, spinning  and  weaving  of  cotton. 

There  are  two  varieties  of  cotton  grown  in  Peru, 
which  are  known  in  the  market  as  ^^  smooth  Peru- 
vian" and  ''rough  Peruvian.''  Smooth  Peruvian 
yields  itself  more  readily  to  the  spinner's  require- 
ments, is  very  flexible  and  easily  prepared  for  spin- 
ning. The  rough  Peruvian  possesses  characteristics 
closely  resembling  wool,  is  ''fairly  strong"  and  is 
used  mixed  with  wool  in  the  manufacture  of  woolen 
goods  for  which  it  is  peculiarly  suited,  being  al- 
most as  important  as  wool  itself.  There  is  a  great 
demand  for  Peruvian  cotton  in  England  and  other 
markets  supplying  woolen  manufactures.  All  efforts 
to  grow  it  in  the  United  States,  however,  have  been 
unsuccessful,  owing  to  climatic  influences  which 
limit  the  life  of  the  plant  to  one  season's  growth,  in- 
stead of  a  number  of  years  as  designed  by  nature 
for  its  perfect  development,  which  seems  to  have 
been  found  only  in  the  latitude  of  its  native  Peru. 

Other  varieties,  'including  Egyptian,  are  also 
grown  here,  to  some  extent,  but  is  consumed  in  local 
mills. 


14  The  American  Cotton  System 

The  Brazilian  methods  of  culture  and  handling 
cotton  prevail  in  Peru,  the  difference  being  so  slight 
as  to  be  scarcely  noticeable.  Often  the  seeds  are 
planted  in  a  hole  in  the  ground  which  has  been  made 
with  no  other  implement  than  a  pointed  stick,  and 
there  is  little  exertion  used  in  either  cultivation  or 
fertilization.  The  manner  of  baling  does  not  differ 
materially  from  those  employed  in  Brazil,  and  the 
bales  are  light,  averaging  about  200  pounds.  In 
1885  the  total  production  was  about  12,000  bales, 
while  in  1906  it  was  augmented  to  55,000  bales. 

cotton-growing  in  MEXICO. 

Cotton  culture  in  Mexico  is  older  than  any  known 
history  of  the  country,  and  it  is  evident  that  cent- 
uries ago  the  natives  were  acquainted  with  the  uses 
and  cultivation  of  the  plant,  and  were  expert  in  the 
manufacture  of  cotton  goods,  before  the  advent  of 
the  white  man. 

Geographically,  Mexico  is  splendidly  situated, 
with  a  climate  varying  with  elevation  from  the  hot 
tropical  valleys  to  cool,  delightful,  perpetual  spring 
of  the  immense  table-lands,  that  are  eminently  suit- 
ed to  the  growth  and  full  development  of  the  cot- 
ton plant,  if  improved  cultural  methods  and  ade- 
quate labor  could  be  employed  the  export  of  cotton 
from  that  country  could,  doubtless,  be  increased 
greatly. 

The  tree  and  annual  varieties  of  cotton  are  grown 
in  Mexico,  the  fiber  is  of  good  length  and  strength, 
though  thinner  and  less  silky  than  American  cotton, 
as  the  plant  suffers  from  insect  pests,  one  of  which 
is  the  boll  weevil,  the  staple  is  not  so  clean. 


Cotton  History  15 

It  is  estimated  that  about  80  per  cent  of  the  cotton 
crop  is  grown  in  the  district  known  as  '^Laguna/' 
which  includes  ''a  strip  of  the  State  of  Coahuila  and 
smaller  adjacent  portions  of  Durango  and  Chihua- 
hua. ' '  Irrigation  works  on  the  Nazos  river  supplying 
necessary  moisture. 

Modern  gins  are  used,  each  plantation  having  its 
own  gin  and  press.  The  square  bale,  weighing  about 
500  to  550  pounds,  with  five  one-inch  ties,  is  used. 
Statistics  of  the  annual  production  have  not  been 
obtained,  but  it  is  estimated  at  130,000  bales,  all  of 
which  is  retained  by  mills  of  the  country. 

cotton   in  BRITISH  INDIA. 

India  is  credited  with  being  the  birthplace  of  cot- 
ton culture  and  manufacture,  the  mention  of  the 
plant  by  very  early  historians,  has  led  to  the  con- 
clusion that  it  originated  there,  but  whether  this 
is  a  correct  view,  or  w^hether  it  was  indigenous  to 
some  other  country  and  was  carried  to  India  cent- 
uries ago,  may  ever  remain  obscured  by  the  length- 
ening shadows  of  the  past.  It  is  certain,  however, 
cotton  was  known  to  the  ancient  inhabitants  of  In- 
dia, and  it  is  probable  that  the  rude  and  unwieldy 
one  thread  wheels  used  by  them  for  spinning  the 
coarsest  yarns  was  copied  later  in  the  common  do- 
mestic spinning  wheels  long  in  use  in  England  and 
America. 

The  areas  from  which  the  commercial  cotton  of 
the  country  is  drawn,  are  the  Central  Tablelands 
or  Deccan,  the  Valley  of  the  Ganges,  Western  and 
Southern  India,  and  embraces  what  is  considered  the 
cotton  area  of  India. 


16  The  Americajst  Cotton  System 

The  climate  is  varied  according  to  altitude  and 
uneven  distribution  of  rainfall.  A  hot,  dry  season 
from  April  to  September  marking  the  winter  time 
and  six  months  following  a  plentiful  distribution  of 
moisture  give  the  summer  and  growing  period  in 
all  the  fertile  valleys,  table-lands  and  deltas  of 
the  great  rivers  contribute  towards  making  India 
one  of  the  cotton  growing  countries  of  the  world. 
Within  this  wide  extent  of  country  are  areas  where 
the  soil  is  unsuitable  to  cotton  growing,  where 
drought  scorches  plant  life  and  where  a  rapidly  in- 
creasing population  demand  that  the  strength  of  the 
soil  must  be  given  in  food  for  its  people,  with  rav- 
ages of  insect  pests  in  favoring  localities,  together 
with  the  retarding  influences  of  unscientific  cultural 
methods,  preclude  a  probability  of  any  material  in- 
crease in  the  production  of  cotton  in  India.  While 
production  has  increased  to  some  extent  in  recent 
years,  consumption  of  cotton  in  that  country  has  in- 
creased likewise,  making  no  perceptible  change  in 
the  quantity  for  export;  it  is  estimated  that  besides 
the  amount  consumed  in  local  mills,  about  500,000 
bales  are  used  in  the  homes  of  the  people. 

Experiments  with  American  cotton  in  India  have 
proved  highly  successful,  but  of  the  native  varieties 
it  can  not  be  said  that  it  is  of  the  finest  quality, 
'Hhe  fibres  are  large  in  diameter,  short  in  length, 
irregular  in  strength  and  color,  and  often  very  dirty.'' 

With  the  exception  of  a  few  districts  where  im- 
proved modem  methods  are  employed  in  cotton  cul- 
ture, the  usual  mode  of  cultivation  is  but  little  ad- 
vanced from  that  used  by  the  people  of  India  hun- 
dreds of  years  ago.    Oxen  are  used  for  turning  over 


f^    ^.     Of    THE  \ 

I   UWIVERSITY  ) 

Y         Of  / 

Cotton  History  17 

the  soil  which  covers  the  last  season's  cotton  stalks 
and  serve  as  an  inadequate  fertilizer  for  the  coming 
crop.  The  seeds  are  sown  broadcast  and  the  most 
primitive  hand  culture  is  given  with  hoes  and  other 
implements  of  rudest  device. 

For  some  years  following  1860  when  the  South 
was  demoralized  by  the  Civil  War  the  quantity  of 
American  cotton  was  reduced  to  such  an  extent  that 
there  resulted  a  great  shortage  in  the  world 's  sup- 
ply, as  a  consequence  Very  high  prices  ensued,  and 
this  in  turn  stimulated  cotton  growing  in  other  coun- 
tries, among  them,  India. 

''The  production  in  1859  was  1,316,800  bales,  and 
had  risen  in  1865  to  2,090,400  bales,  equaling  an  in- 
crease of  nearly  60  per  cent. 

In  1905  the  total  acreage  for  India  was  21,332,000 
acres,  producing  a  crop  of  2,848,800  bales;  an  aver- 
age of  about  67  pounds  per  acre,  while  in  1906  the 
total  acreage  was  22,609,000,  producing  a  crop  of 
4,038,400  bales ;  an  average  of  about  89  pounds  per- 
acre." 

While  these  figures  were  compiled  with  great  care 
by  Messrs.  Lyon  &  Co.,  of  Bombay,  and  through 
them  reported  to  the  United  States  Agricultural  De- 
partment,  they  may  require  some  revision  as  meas- 
ured by  the  out-turn  shown  in  the  commercial  move- 
ment for  the  year. 

It  has  been  found  quite  difficult  to  secure  reliable 
data,  free  from  alteration  and  criticism  from  the 
most  intelligent  sources  on  the  American  crops ;  and 
when  the  environments  of  the  East  Indian  cotton 
grower  is  considered,  the  retarding  influence  of  un- 
systematized methods  of  cultivation  and  crop  report- 

2 


18  The  American  Cotton  System 

ing,  it  is  evident  these  figures  must  be  taken  with 
a  view  to  amendment  and  correction  and  be  ac- 
cepted as  approximate  in  nature. 

EGYPT  AS  A  COTTON  COUNTRY. 

The  following  excerpt  from  ** Consular  Report/' 
July,  1894,  is  interesting  and  instructive. 

**The  story  of  the  development  of  cotton  culture 
in  Egypt  reads  like  a  romance.  In  1821,  a  French 
botanist  found  growing  wild  in  the  garden  of  a 
Cairo  Bey  a  few  plants  possessing  a  long-stapled 
fiber,  which  he  recognized  as  cotton  of  an  excep- 
tionally fine  quality.  The  sagacious  Mehemet  Ali 
seized  upon  the  discovery  and  turned  it  to  benefit. 
Beginning  with  the  vice  regal  farms,  the  raising  of 
cotton  became  general  as  soon  as  it  was  known  that 
its  quality  secured  for  it  a  quick  market  at  high 
prices. 

'*  Indigenous  varieties  were  grown  centuries  ago 
but  the  improvement  in  its  character  and  cultivation 
did  not  begin  until  1820-21.  Sea-Island  seed  from 
America  and  Brazilian  varieties  were  introduced, 
the  former  in  1838  while  the  latter  had  preceded  it 
in  1820,  both  gave  promise  of  favorable  growth,  but 
for  some  reasons  which  are  are  not  given  the  Egyp- 
tian soon  returned  to  his  native  seed. ' ' 

Egyptian  cottons  have  a  long,  strong,  uniform 
fiber  showing  equality  of  growth  and  in  spinning 
value  ranks  next  to  Sea-Island. 

Many  advantages  are  offered  as  the  home  of  the 
cotton  plant  here;  an  equitable  climate,  long,  warm 
seasons  beginning  early,  with  the  element  of  frost 
entirely  eliminated,  giving  the  plant  a  long  time  to 


Cotton  History  19 

mature  a  continuous  crop  through  the  growing  sea- 
son. Egypt  being  practically  a  rainless  region,  the 
growth  of  cotton  is  dependent  upon  irrigation.  Af- 
ter the  Nile  has  subsided  a  rich  alluvial  deposit 
5rom  the  tropics  is  left  upon  the  land,  and  the  earli- 
est method  of  cultivation  consisted  in  sowing  the  seed 
broadcast  as  we  sometimes  do  wheat  or  oats,  but  not 
so  thick,  little  subsequent  cultivation  was  required  and 
as  the  crop  was  never  disturbed  by  storm  or  rain,  there 
wa^  no  loss  or  damage  anticipated  from  these  sources, 
and  a  high  grade  of  cotton  could  be  gathered,  unless 
interfered  with  by  insect  depredations. 

More  modern  methods  of  culture  are  employed 
at  the  present  time,  and  as  agricultural  lands  in  the 
delta  of  the  Nile  range  in  value  from  $200  to  $600 
per  acre,  the  Egyptian  farmer  economizes  according- 
ly. The  cotton  is  planted  on  beds  from  thirty  to 
thirty-six  inches  apart,  which  are  so  arranged  as 
to  best  receive  the  water  necessary  to  the  perfect 
development  of  the  plant,  nine  to  ten  applications  be- 
ing required  before  picking  begins.  The  seeds  are 
planted  near  the  top  on  the  sides  of  the  beds,  and 
the  plants  are  often  not  more  than  twenty  inches 
apart  in  the  rows ;  this  close  planting  induces  shade 
and  dampness,  which  fosters  insect  life  and  is  cal- 
culated to  injure  the  fiber. 

The  cotton  area  of  Egypt  is  limited  to  the  extent 
of  land  reached  by  irrigation,  for  wherever  it  is 
possible  to  carry  the  vitalizing  water  of  the  Nile,  the 
richest  vegetation  springs  luxuriantly.  The  Eng- 
lish are  now  building  an  immense  dam  on  the  Up- 
per Nile  for  the  purpose  of  augmenting  the  water 


20  The  American  Cotton  System 

supply  for  irrigation  with  a  view  to  reclaiming  more 
of  the  desert  land  for  increased  cotton  acreage. 

1906  has  been  reported  as  an  especially  favorable 
year  for  cotton  in  the  Valley  of  the  Nile;  the  pre- 
vious overflow  of  the  river  had  contributed  the 
requisite  excess  of  vegetable  matter  to  the  soil; 
night  fogs,  which  at  times  occur  in  temperate  and 
warm  climates  to  the  detriment  of  the  plant,  were 
not  experienced  to  cherish  insect  pests ;  and  a  large 
yield  of  cotton  was  harvested  and  from  the  esti- 
mated 1,850,000  acres,  1,400,000  bales  were  gathered 
weighing  500  pounds  each. 

"In  this  connection  the  following  report  of  Lord  Cromer 
on  the  Finance,  Administration,  and  Condition  of  Egypt 
and  the  Sudan  country  for  the  year  1906  may  prove  of 
interest: 

"  'Although  the  [cotton]  area  sown  in  1906  is  believed 
to  have  been  64,506  acres  less  than  in  1905,  the  crop  will 
probably  turn  out  to  be  larger  by  from  100,000  to  150,000 
bales,  which  increase  is  due  to  favorable  climatic  condi- 
tions, abundant  water,  and  less  damage  than  in  IS 05  from 
cotton  boll  worm. 

"  *It  now  appears  almost  certain  that  the  harm  gener- 
ally attributed  to  fogs  is  in  reality  done  by  the  boll  worm, 
which  makes  its  appearance  during  the  season  when  fogs 
are  usually  prevalent.     *     *     * 

"  'In  order  to  ascertain  to  what  extent  the  cotton  bear- 
ing area  is  susceptible  of  expansion,  I  assume  that  the 
whole  of  the  basin  lands  in  the  northern  half  of  Upper 
Egypt  will  be  brought  under  perennial  irrigation,  and  that 
the  uncultivated  portions  in  both  Upper  and  Lower  Egypt 
will  ultimately  be  reclaimed.  The  cotton-bearing  area  will 
then  extend  over  some  5,600,000  acres.  On  the  basis  of  a 
40  per  cent  acreage  per  annum  and  a  yield  of  446  pounds 
per  acre,  this  area  might  produce  an  annual  cotton  crop  of 
about  1,981,000  bales  of  500  pounds  each.     It  is  to  be  ob- 


Cotton  History  21 

served  that  a  considerable  portion  of  the  land  at  present 
under  cultivation  is  being  improved,  which  will  without 
doubt  contribute  to  raise  the  average  yield  per  acre.  *  *  * 
It  will  of  course  be  understood  that  this  crop  of  1,981,000 
bales  can  not  be  produced  until  both  the  water  supply  has 
been  largely  increased,  either  by  raising  the  Assouan  dam 
or  by  some  other  means,  and  until  reclamation  works  on  a 
large  scale  have  been  executed  in  Lower  Egypt. 

"  'The  population  of  Egypt  has  been  estimated  at  10,- 
000,000,  and  to  provide  food  and  clothing  for  these  people, 
and  protect  the  normal  increase,  it  does  not  seem  possible 
that  any  great  addition  to  the  annual  acreage  given  to  cot- 
ton can  be  made,  unless,  through  improvements  so  vast  as 
to  require  from  ten  to  fifteen  years  to  complete.' " 

Cotton  growing  in  Egypt  was  gradually  develop- 
ed: *^*In  1850,  thirty  years  after  the  cultivation 
began,  the  crop  was  only  87,200  bales  and  nine  years 
later  only  100,800  bales.  By  1865  the  production 
had  increased  to  439,000  bales.  This  remarkable 
growth  was  due  to  the  scarcity  of  the  staple,  caused 
by  the  serious  check  to  cotton  culture  in  the 
United  States  during  the  Civil  War.  By  1890  the 
production  had  increased  to  798,000  bales." 

The  cotton  acreage  and  production  in  Egypt  for 
the  years  1898  to  1906  inclusive,  is  appended  in 
tabular  form,  which  will  make  it  easy  for  ,  ready 
reference,  and  also  show  the  high  average  yield  per 
acre  annually. 


*Cotton  Production,"  1906.     Bulletin  76. 


22  The  American  Cotton  System 

(Number)  (500-pound  bales) 


Year. 

Acres.^ 

Production.* 

1906 

1,850,000 

1,400,000 

1905 

1,900,000 

1,250,000 

1904 

1,850,000 

1,258,000 

1903 

1,750,000 

1,289,000 

1902 

1,700,000 

1,157,000 

1901 

1,650,000 

1,262,000 

1900 

1,600,000 

1,075,000 

1899 

1,500,000 

1,295,419 

1898 

1,450,000 

1,112,174 

RUSSIA   IN   ASIA   AND    ITS   COTTONS. 

The  cotton  growing  areas  of  Asiatic  Russia  are: 
Transcaucasia,  especially  the  low,  level  and  fertile 
lands  bordering  the  Caspian  Sea,  also,  the  eastern 
shore  in  Turkestan;  besides,  a  large  area  of  Turke- 
stan extending  from  Arabia  and  Afghanistan  on  the 
south,  to  south  of  the  Kirghiz  Steppes.  It  has  been 
shown  that  much  of  this  great  territory  is  adapted 
to  the  growing  of  cotton,  and  under  governmental 
encouragement,  protection  and  aid  produces  con- 
siderable quantities  of  the  fiber,  however,  it  was  not 
until  the  American  Civil  War,  owing  to  the  scarcity 
and  high  prices  experienced  at  that  time,  the  cot- 
ton culture  in  Turkestan  received  new  life  and  vigor. 

Native  and  the  hardier  American  Upland  cottons 


^Compiled  by  Alfred  B.  Shepperson  in  "Cotton  Facts." 

^Information  furnished  by  Herman  Capelle  Co.,  and 
U.   S.   Agricultural  Department. 

(In  the  chapter  on  Egypt  the  data  is  drawn  in  part 
from  Reports  of  Department  of  Com.  &  La.  Bureau  of 
the  Census.) 


/ 


Cotton  History  23 

are  grown  in  the  country,  the  long  staple  varieties 
have  been  found  unsuited  to  the  climate. 

In  many  places  the  seeds  are  sown  broadcast  and 
rude  wooden  plows  and  antiquated  cultured  methods 
are  employed,  which  can  but  minimize  the  yield; 
while  in  the  cotton  area  surrounding  Tashkend, 
there  seems  to  be  a  decided  determination  to  use 
the  most  modern  improved  and  scientific  cultivation 
and  implements  in  growing  this  useful  fiber  which 
give  encouraging  results. 

**  According  to  the  Commercial  Industrial  Gazette 
of  St.  Petersburg  of  January  24,  1907,  the  produc- 
tion of  cotton  in  Russia  in  1906  amounted  to  675,000 
bales  of  500  pounds  each,  of  which  Central  Asia 
produced  639,000  bales  and  Transcaucasia,  36,000 
bales."  This  region  being  in  a  belt  of  country  sub- 
ject to  frost  damages,  influences  the  output  more  or 
less,  as  the  frost  appears  early  or  late.  It  is  es- 
timated the  early  frost  in  the  latter  portion  of  1907 
destroyed  400,000  bales. 

CHINA  AS  A  COTTON  COUNTRY. 

It  is  evident  that  cotton  was  cultivated  in  China 
for  domestic  uses,  centuries  ago,  but  statistics  were 
not  available  to  show  the  actual  quantity  grown, 
until  recently  a  report  was  given  by  Mitsui  &  Co., 
Osaka,  Japan,  to  the  United  States  Agricultural  Bu- 
reau showing  the  quantity  grown  in  China  in  1906 
for  the  local  mills  to  be  418,000  bales  of  500  pounds 
each. 

The  herbaceous  varieties  of  cotton  are  cultivated 
here  and  the  fiber  is  of  inferior  quality,  probably, 
owing  to  the  primitive  and  non-progressive  manner 


24  The  American  Cotton  System 

of  cultivating  the  plant,  where  little  preparation 
is  given  the  soil  and  the  seed  are  sown  broadcast,  re- 
sulting in  a  stunted,  stubby  stalk,  small  bolls  and 
much  immature  cotton.  In  some  localities  better 
modes  of  culture  are  pursued  resulting  in  better 
crops. 

There  are  large  areas  of  China,  no  doubt,  adapted 
to  successful  cotton  growing,  but  as  there  is  a  large 
population  making  a  heavy  demand  for  food  prod- 
ucts, necessarily  reducing  thfe  area  of  tillable  land 
to  be  placed  to  cotton,  which  is  grown  only  in  small 
patches  for  home  consumption  and  scant  exporta- 
tion. 

Korea  received  her  first  introduction  to  cotton 
culture  about  five  hundred  years  ago  from  China, 
the  best  cotton  lands  are  in  the  southern  part  of  the 
peninsula,  but  there  is  little  probability  that  much 
of  this  territory  will  be  so  employed,  as  the  existing 
circumstances  show  a  great  similarity  to  those  of 
China  in  exacting  food  products  from  the  land. 

COTTON    IN    JAPAN. 

Though  cotton  has  been  known  in  Japan  for  some 
centuries,  being  brought  from  China,  it  was  not  un- 
til early  in  the  seventeenth  century  that  the  cul- 
ture commenced,  but  owing  to  the  inferior  quality 
of  the  fiber  grown,  the  prosecution  of  the  industry 
made  little  progress,  though  mill  construction  has 
increased  rapidly,  and  to  meet  the  demands  for  raw 
cotton  other  countries  are  relied  upon  to  supply  the 
spinning  requirements,  the  disposition  of  the  people 
to  buy  factory  made  yarns,  and  fabrics  of  foreign 
manufacture  as  being  superior  to  those  made  from 


Cotton  History  25 

home  grown  cotton,  from  whicli  facts  the  cause  of  this 
decrease  is  largely  due. 

The  total  production  of  cotton  for  Japan  *'in 
1904,  amounted  to  16,000  bales  of  500  pounds  each, 
while  that  of  1906  was  11,000  bales. 

cotton  culture  in  other  countries. 

•  There  are  other  countries  producing  considerable 
quantities,  namely: 

^Turkey,  with  a  production  in  1907  of  about  80,- 
000  bales  of  500  pounds  each;  Persia,  with  a  crop 
of  51,000  bales;  Greece,  about  20,000  bales;  Italy, 
10,000  bales ;  Indo-China,  15,000  bales ;  Africa,  other 
than  Egypt,  20,000  bales ;  Haiti,  15,000  bales ;  Dutch 
East  Indies,  12,400  bales ;  Japan,  9,000  bales ;  Korea, 
6,000  bales,  and  Argentina,  about  10,000  bales. 

In  addition  to  these,  there  are  still  other  coun- 
tries producing  some  cotton,  nearly  all  of  which  is 
consumed  in  the  homes  of  the  people  or  in  the  local 
mills,  rendering  it  impossible  to  estimate  the  exact 
amount  grown. 

Cotton  consumption  steadily  increased  making 
larger  supplies  necessary  and  this  heavy  demand  fall- 
ing largely  upon  the  spinners  of  Europe,  caused 
them  to  fear  that  the  supply  of  upland  cotton  from 
the  United  States  would  be  inadequate  to  their  re- 
quirements, a  movement  to  encourage  cotton  cul- 
ture in  many  European  colonies  was  begun,  for  the 
purpose  of  growing  crops  of  cotton,  which,  though 
small  as  taken  separately,  in  the  aggregate  would 


*"Cottoii    Production,"    1907,    Dept.    of    Com.    and    La., 
Bureau  of  the  Cen. 


26  The;  American  Cotton  System 

be  sufficient  to  supplement  any  possible  deficiency  in 
the  amount  received  from  the  United  States  to  the 
extent  that  steadiness  in  annual  supply  would  fol- 
low. 

***The  principal  efforts  in  this  direction  have  been 
made  by  the  British  Cotton  Growers'  Association; 
in  a  much  less  degree  efforts  have  been  made  by  the 
German  Colonial  Economic  Committee;  for  France, 
the  undertaking  is  in  the  hands  of  the  Colonial  Cot- 
ton Association ;  for  Portugal,  The  Industrial  Associ- 
ation of  Lisbon;  for  Italy,  the  Cotton  Industrial 
Association  and  Cotton  Exchange;  for  the  Nether- 
lands, the  Netherlands  Cotton  Growing  Association ; 
for  Belgium,  the  Belgian  Cotton  Association;  and 
for  Spain,  the  National  Industrial  Propaganda." 

** Outside  of  the  cotton  production  of  the  East 
Indies,  Egypt,  and  the  Sudan,  the  colonial  crop  of 
1903  was  3,052  bales  with  a  net  weight  of  478 
pounds,  which  weight  conforms  to  the  uniform 
weight  with  the  computed  bales  of  the  cotton  of 
the  United  States.  In  1905  the  crop  had  increased 
to  12,109  bales,  and  in  1906  to  about  18,000  bales, 
the  crop  for  the  last  year  being  to  a  small  extent 
estimated. 

*'The  increase  of  the  cotton  of  1906  over  that 
of  1905,  was  5,677  bales  in  British  colonies  outside 
of  Egypt,  the  Sudan,  and  the  East  Indies,  and  250 
bales  in  German  colonies,  the  increase  in  French, 
Spanish,  Dutch,  Italian,  Belgian,  and  Portugese  col- 
onies being  practically  nothing  outside  of  the  East 


♦Crop  Reporter,  January,  1908. 


Cotton  History  27 

Indies.  The  British  increase  is  found  in  Uganda, 
the  Nigerias,  Cyprus,  and  several  of  the  West  India 
Islands,  against  which  there  are  decreases  in  the 
Central  African  Protectorate  and  in  Jamaica.  The 
German  increase  is  in  Togo.  Two-fifths  of  the  Brit- 
ish increase  is  found  in  Central  Africa  and  in  the 
Nigeria  region.'' 

The  territorial  area  of  Northern  Nigeria  is  es- 
timated at  323,000  square  miles  covering  a  region 
entirely  tropical  and  semitropical,  a  large  propor- 
tion of  which  can  be  placed  to  cotton  culture.  An 
area  of  323,000  square  miles  represents  over  200,000,- 
000  acres.  The  entire  ** cotton  belt"  of  the  Southern 
States  of  America  contains  about  448,000,000  acres, 
and  while  vast  tracts  of  forests  and  waste  lands 
are  included  in  this  belt,  yet  enough  remains  suit- 
able for  the  growth  of  cotton  to  give  an  adequate 
acreage  sufficient  to  supply  all  the  world  for  years 
to  come. 

The  British  Cotton  Growing  Association  in  its 
efforts,  aided  by  governmental  support,  to  grow  cot- 
ton in  the  Nigerian  territory  finds  the  best  lands  for 
its  production  lie  some  distance  inland,  and  to  de- 
velop these  lands  into  paying  properties,  require  not 
only  competent  and  skilled  labor,  but  large  capital, 
and  to  evolve  from  the  primitive  forests  and  virgin 
soils  cotfon  farms  of  sufficient  magnitude  to  produce 
a  quantity  of  cotton  that  would  affect  to  any  ap- 
preciable extent  the  output  of  the  world,  will  re- 
quire many  years  to  accomplish,  and  the  construc- 
tion of  railway  transportation  facilities  to  interior 
points  is  absolutely  necessary  to  their  successful  op- 
eration 


28  The  American  Cotton  System 

Quoting  from  ''Cotton/'  a  Manchester,  England, 
publication  states,  that  ''cotton  is  not  only  indigen- 
ous, but  has  been  cultivated  on  a  comparatively 
large  scale  for  centuries  for  native  manufactures, 
which  have  achieved  a  reputation  throughout  West 
Africa — Kano,  the  center  of  the  industry  being  not 
inappropriately  termed  the  'Manchester  of  West 
Africa — ^the  present  production  of  cotton  for  na- 
tive use  has  been  estimated  at  50,000  bales."  As 
no  railway  lines  extend  into  these  cotton  areas,  the 
production  therefrom  amounts  to  naught  as  a  com- 
mercial commodity,  and  by  virtue  of  their  inacces- 
sibility will  remain  so  for  an  indefinite  time. 

BRITISH    NORTH   BORNEO. 

Lying  between,  from  about  110  degrees  to  120  de- 
grees east  longitude,  cut  by  the  equator,  Borneo  is 
wholely  a  tropical  country;  rich,  perhaps,  in  un- 
developed fertile  soils  and  agricultural  possibilities, 
but  handicapped  by  its  still  primitive  inhabitants; 
the  enquiry  has  been  raised  as  to  the  practicability 
of  awakening  an  interest  in  cotton  growing  among 
the  native  population,  under  the  auspices  and  pro- 
tection of  the  British  Government,  as  heretofore 
efforts  in  this  direction  have  been  meager  and  ten- 
tative. The  samples  forwarded  to  the  Imperial  In- 
stitute for  examination  showed  the  staple  to  be 
short,  rough  and  irregular  in  length  and  strength, 
but  it  was  thought  to  be,  under  proper  cultivation, 
capable  of  material  improvement,  but  it  is  a  weary 
journey  between  primeval  man,  forests  and  wide 
ocean  position,  to  civilized  man,  cultivated  fields, 
railway  transportation  facilities  and  skilled  labor, 


Cotton  History  29 

all  of  which  are  essential  to  the  successful  produc- 
tion of  cotton;  and  when  Bo'rneo  has  reached  this 
stage  of  advancement,  possibly  new  cotton  produc- 
ing areas  may  be  found  there,  but  not  until  then 
will  it  be  of  sufficient  magnitude  to  be  reckoned  as 
one  of  the  cotton  producing  countries  of  the  world. 

COTTON  AREA  AND  PRODUCTION. 

The  cotton  plant  reaches  the  most  perfect  state 
of  development  in  the  fertile  soils  of  warm  countries, 
and  it  is  between  the  fortieth  parallel  north  and 
the  twentieth  south  latitude  that  the  world's  supply 
of  the  ** fleecy  staple''  is  grown.  This  area  *' ex- 
tends from  the  Mediterranean  Sea  to  the  Cape  of 
Good  Hope;  from  Spain  to  Japan  and  Australia; 
and  from  Norfolk,  Va.,  in  the  United  States,  to  Bue- 
nos Aires,  in  South  America."  This  whole  area 
marking  the  cotton  belt  of  the  world,  though  vast  in 
itself,  is  circumscribed,  as  compared  to  the  entire 
surface  of  the  earth,  yet,  taking  into  consideration 
the  corresponding  extent  occupied  by  ocean  bodies, 
by  lands  unavailable,  of  countries  in  which  cotton 
culture  is  an  unknown  factor,  and  countries  in  which 
it  has  proved  unprofitable,  leaves  only  the  southern 
portion  of  the  United  States,  British  India  and 
Egypt  as  the  three  principal  cotton  producing  coun- 
tries of  the  world,  the  United  States  being  para- 
mount to  all  the  others  combined,  virtually  occupy- 
ing a  position  giving  it  a  preponderance  sufficient 
to  practically  control  the  market,  and  it  is  self-evi- 
dent that  there  is  little  danger  of  overproduction 
of  this  valuable  clothing  material  for  an  ever  in- 
creasing population. 


30  The  America.n  Cotton  System 

As  an  index  to  the  future,  reliable  statistics  show 
the  demands  of  the  world  for  cotton,  annually  in- 
creasing in  a  ratio  equivalent  to,  approximately, 
400,000  bales;  an  increase  commensurate  with  the 
additional  acreage,  and  from  increased  demands 
that  will  be  had  upon  the  cotton  fields  at  no  distant 
day  indications  point  to  an  increase  proportionately 
higher. 

COTTON  AREA  OP  THE  UNITED  STATES. 

By  reference  to  Map  1 — Cotton  Producing  Area 
of  the  United  States,  1907,  in  ** Cotton  Production,'' 
Bulletin  95,  it  will  be  seen  that  beginning  at  Nor- 
folk in  south-eastern  Virginia,  a  line  traced  irregu- 
larly avoiding  the  mountain  regions  of  North  Caro- 
lina and  Tennessee,  including  portions  of  the  south- 
west comer  of  Kentucky  and  Missouri,  along  or  near 
the  northern  boundaries  of  Arkansas  and  Oklahoma 
to  the  eastern  boundary  line  of  New  Mexico,  thence 
south  to  a  point  on  the  boundary  line  between  Mexi- 
co and  Texas,  indicates  the  limits  of  the  cotton  area 
of  the  United  States,  the  greatest  cotton  producing 
region  of  the  world;  an  expanse  of  territory  1450 
miles  in  length  from  east  to  west  by  500  miles  in 
breadth,  comprising  a  total  area,  estimated  at  700,- 
000  square  miles,  or  448,000,000  acres,  of  which  only 
one-fourteenth,  or  one  acre  in  fourteen  was  given 
to  cotton  in  1907. 

In  commenting  on  the  area  adapted  to  the  culture 
of  cotton  in  the  Southern  States  and  the  amount 
produced  thereon,  the  following  statement  from  Bul- 
letin 76,  Bureau  of  the  Census,  is  appropriate  and 
to  the  point. 


Cotton  History  31 

**No  country  in  the  world  possesses  the  combina- 
tion of  advantages  found  in  the  southern  part  of 
the  United  States  for  profitable  cotton  cultivation. 
In  this  section  the  soil  is  naturally  adapted  to  cot- 
ton growing,  the  climate  is  favorable,  the  labor  bet- 
ter than  elsewhere,  and  the  farm  management  more 
intelligent  and  experienced.  Combined  with  these 
favorable  internal  conditions  are  good  transporta- 
tion facilities. ' ' 

There  is  a  great  demand  for  American  cotton  in 
the  markets  of  Europe.  *The  amount  that  left  our 
ports  on  foreign  demands  ending  March  31,  1907, 
was  8,705,896  bales,  compared  to  7,650,693  bales  for 
the  preceding  year.  The  exports  of  the  first  seven 
.months  of  the  present  commercial  year  exceed  those 
of  the  corresponding  period  last  year  by  1,952,380 
bales. 

EARLY   EXPERIMENTS    AND   PRODUCTION    IN    THE   UNITED 
STATES. 

The  knowledge  of  cotton  growing  wild  in  islands 
of  the  West  Indies,  is  as  old  as  the  history  of  their 
discovery  by  the  Spaniards  in  1492,  though  little 
efforts  were  made  towards  its  cultivation  until 
1621.  It  seems  that  the  time  for  its  introduction  as 
a  useful  commercial  and  domestic  product  was  now 
ripe,  and  the  '* divinity  that  shapes  our  ends*'  kindly 
took  the  cotton  plant  in  hand  tendering  it  for  the 
benefit  and  civilization  of  the  whole  world,  and  as 
a  late  writer  expresses  it,  **man  can  not  be  civilized 


♦Cotton  Production,  1906,   Bulletin  76,  Dept.  Com.  and 
La..  Bureau  of  the  Cen. 


32  The  American  Cotton  System 

without  clothing"*  him.  Necessity,  the  rugged  teach- 
er, at  a  very  early  period,  forced  upon  the  first 
settlers  of  this  country  attention  to  manufacture 
and  a  demand  for  a  new  clothing  material,  to  which 
cotton  alone  was  adequate  or  available.  ^''^'In  the  ten 
years  following  the  founding  of  Massachusetts  Col- 
ony in  1630,  a  heavy  emigration,  equal  to  the  whole 
population  annually,  was  added,  and  the  raising  of 
food  products  became  the  most  profitable  pursuit, 
so  great  was  the  demand  that  the  price  of  cattle 
went  as  high  as  twenty-five  pounds  sterling,  but 
when  in  1640,  the  Eepublicans  gained  the  ascenden- 
cy in  the  government  in  England;  persecutions  for 
religious  non-conformity  ceased  and  with  it  emigra- 
tion to  this  country  was  reduced  to  almost  nothing; 
the  demand  for  provisions  was  so  reduced  that  cat- 
tle sold  for  not  above  five  pounds  a  head.  The  effect 
was  extremely  distressing,  but  it  put  the  intelligent 
colonists  upon  new  resources,  and  to  help  them  in 
this  exigency,  '^Hhe  general  court  made  order  for  the 
manufacture  of  woolen  and  linen  cloth'' ;  cut  off  from 
source  of  supply  in  England  on  the  one  hand,  it 
remained  for  benignant  Traffic  to  open  a  way  to  sup- 
ply the  deficiency  and  trade  being  opened  with  the 
West  Indies  and  Wine  Island,  where  among  other 
goods,  much  ^^  cotton  wooV  was  brought  into  the  col- 
ony and  the  people  soon  learned  a  way  to  supply  them- 
selves with  [cotton]  linen,  by  spinning  and  weaving 
the  new  fiber,  seemingly  the  gift  of  Providence. 
Hence,   the   seeds   of   the   cultivated  varieties   are 


*Watkin*s   "King   Cotton,"   page    10. 
**Book  of  the  United  States,"   p.    353. 


?  i 


OP   THf 

Of 


Cotton  History  33 

thought  to  have  been  brought  from  the  West  Indies 
and  mention  is  made  of  its  culture  in  Virginia  as 
early  as  1621 ;  in  South  Carolina  in  1733 ;  In  Georgia 
in  1734,  the  most  suitable  soil  for  the  cultivation  of 
cotton  being  the  islands  lying  along  the  coast  which 
produced  the  best  variety,  known  in  France  as  ' '  Geor- 
gia cotton''  and  in  England  as  '^Sea-Island." 

In  1822  cotton  was  reported  as  **  growing  to  the 
height  of  six  feet,"  in  Louisiana,  though  its  culture 
is  said  to  date  back  to  1722.  In  1822  there  were  ex- 
ported from  the  port  of  New  Orleans,  167,742  bales, 
however,  the  evolution  of  the  cotton  plant,  from  a 
beautiful  natural  curiosity,  a  wild  weed  of  the  tropics, 
to  a  cultivated  commercial  substance,  the  snowy  web 
of  a  single  season's  weaving,  might  encircle  the  globe, 
was  of  slow  growth,  and  it  was  118  years  after  its 
introduction  in  Virginia,  before  a  shipment  was  made 
to  England.  ''^A  few  bags  were  exported  from 
Charleston,  S.  C,  in  1747 ;  not  until  1770  was  it  made 
a  staple  crop,  a  record  of  the  shipments  to  Liverpool 
are  as  follows:  *'Ten  bales  from  Charleston,  3  bales 
from  New  York,  4  bags  from  Virginia,  and  3  barrels 
from  North  Carolina."  England  looking  on,  incredu- 
lous that  such  immense  ( ?)  quantities  of  cotton  could 
be  grown  in  the  colonies,  seized  8  of  the  14  or  15  bales 
shipped  to  Liverpool  in  1784,  impressed  with  the  be- 
lief that  it  had  been  wrongly  entered  and  was  not 
grown  in  the  American  colonies. 

The  extension  of  the  cotton  growing  areas,  within 
the  last  ten  years,  has  reached  a  surprising  acreage, 


♦Prom  "Cotton  Production,**  Bulletins  76  and  95. 


34  The  American  Cotton  System 

especially  in  the  ^Panhandle  of  Texas,  which  com- 
prises 51,350  square  miles,  produced  in  1889  only 
2000  bales  of  cotton,  had  increased  to  113,623  bales 
in  1907 ;  east  of  this  a  block  of  sixteen  counties,  with 
Hardeman,  Wichita,  Eastland  and  Taylor  as  corner 
counties,  encloses  an  area  at  one  time  thought  to  be 
unsuitable  to  cotton  growing,  owing  to  the  lack  of 
rains,  but  produced  in  1899,  47,622  bales,  while  in 
1907,  the  increase  had  reached  206,979  bales.  Okla- 
homa has  a  greatly  increased  cotton  acreage,  where 
large  ranches  have  been  ^^cut  up''  into  small  farms, 
and  in  localities  formerly  given  to  wheat,  the  growers 
being  disposed  to  change  from  wheat  to  cotton  as  the 
surer  crop. 

Irrigation  has  been  utilized  to  a  considerable  extent 
in  Texas,  New  Mexico,  Utah  and  Arizona,  and  prom- 
ises a  greater  development  in  the  future,  according 
to  statistics  10,000  acres  of  this  irrigated  land  was 
given  to  cotton  in  Texas  and  New  Mexico,  in  1907. 
As  the  existing  climatic  conditions  are  not  wholely  un- 
like those  of  Egypt — a  long,  hot  and  dry  season,  with 
water  applied  as  required  during  its  period  of  growth 
and  maturity,  which  ripens  a  strong,  uniforyi  fiber, 
followed  by  a  long  dry  season  on  the  opening  bolls, 
are  interesting  facts  connected  with  cotton  growing  in 
the  south-west.  Experiments  with  Egyptian  cotton 
are  being  made  in  Arizona  along  the  Salt  and  Gila 
rivers,  and  as  long  as  science,  aided  by  governmental 
encouragement  seeks  for  utilization  of  waste  lands,  for 
improved  methods  and  products,  great  results  may  be 
expected. 


*From  "Cotton  Production,"  Bui.  95. 


CHAPTER  II. 
COTTON  CLASSIFICATION. 

Owing  to  the  fact  that  cotton  ripens  in  a  period 
of  four  months,  more  or  less  according  to  the  sea- 
sons, varying  somewhat  as  to  the  latitude  of  the  south- 
ern or  most  northern  boundary  of  the  cotton  belt,  usu- 
ally beginning  about  August  1st  and  ending  with  the 
first  killing  frost,  the  picking  continuing  often  till 
March. 

The  early  maturing  cotton  that  is  gathered  before 
any  rain  has  fallen  gives  the  better  or  high  grade 
cottons,  while  to  the  practiced  eye  of  the  expert 
classer,  the  vicissitudes  of  the  weather  are  pictured  on 
the  cotton  samples,  and  he  eventually  reads  the  story 
of  rain,  or  storm,  or  neglected  fields  in  the  fleecy 
staple,  and  pronounces  them  stained^  tinged  or  low 
grade,  as  the  cotton  shows  itself  to  be  in  character, 
from  this  exposure. 

As  there  is  no  definite  mechanical  rule  by  which 
cotton  can  be  classed,  the  matter  resting  with  the  judg- 
ment of  the  individual  to  a  great  extent,  evidences 
the  reason  for  many  discrepances  arising  between 
even  expert  classers,  in  passing  on  the  same  cotton. 

All  classers  have  a  somewhat  matured  idea  as  to 
what  constitutes  a  particular  grade  of  cotton,  but  as 
it  is  rare  that  two  grades  of  cotton  are  identically 
the  same  in  every  particular,  then  it  follows  that  one 
grade  approaches  another  so  nearly  in  appearance  as 
to  be  called  the  same  in  character,  and  on  these  re- 


36  The  American  Cotton  System 

semblances,  opinions  differ  as  to  the  particular  class 
to  which  a  certain  grade  should  be  assigned. 

In  the  main,  there  is  a  general  agreement  between 
classers  as  to  what  constitutes  a  specific  grade  of  cot- 
ton, more  particularly,  those  classing  cotton  in  any 
particular  State,  that  is,  one  well  versed  in  classing 
Texas  cotton  would  vary  but  little  from  his  accus- 
tomed classification  of  such  cotton,  without  reference 
to  type  or  sample,  but  if  requested  to  classify  North 
Carolina  or  Georgia  cotton,  would  find  himself,  per- 
haps, somewhat  at  sea  on  first  attempt,  likewise,  the 
Georgia  or  Carolina  classer  would  see  a  marked  dif- 
ference between  the  Texas  and  Carolina  or  Georgia 
product  on  first  observance  of  these  cottons,  and  un- 
til accustomed  to  the  character  of  the  two  cottons, 
would,  no  doubt,  question  his  own  ability  to  correctly 
classify  them,  for  a  time  at  least. 

"Winds,  rain  and  sunshine,  so  change  the  appearance 
of  cotton  while  exposed  to  the  weather  in  the  fields^ 
as  to  produce  many  grades  of  cotton,  and  to  properly 
judge  these  grades  is  the  duty  of  the  classer,  and  it 
is  well  to  again  emphasize  the  fact  that  a  perfect 
classification  of  cotton  can  not  be  performed  with 
absolute  accuracy,  as  an  evidence  of  which,  no  two 
experts  in  classing  a  large  lot  of  cotton  always  agree, 
nor,  indeed,  does  the  same  expert  in  a  second  classi- 
fication of  the  same  cotton  produce  an  exact  dupli- 
cate of  the  initial  classification  every  time. 

It  is  admitted  by  nearly  aU  interests  in  the  cotton 
trade  that  these  differences  of  opinion  among  cotton 
classers  exists  to  a  more  or  less  extent,  especially, 
when  making  classifications  on  assorted  or  mixed 
grades,  a  proof  positive  proving  the  absence  of  any 


Cotton  Classification  37 

fixed  rule  or  standard  by  which  cotton  can  be  classed. 
It  would  be  unfair  to  allege  dishonesty  of  purpose  as 
a  cause  of  difference  of  opinion  arising  between  class- 
ers  taking  up  a  list  of  cotton,  when  a  difference  exists 
as  to  grades,  as  in  most  instances  the  individual  who 
classes  the  cotton  stands  above  reproach  for  honesty, 
truthfulness  and  intelligence. 

No  Mechanical  Means.— As  previously  stated,  there 
being  no  mechanical  means  for  performing  the  work 
absolutely  correct,  as  the  classification  is  done  almost 
exclusively  by  the  eye,  it  is  apparent  then  that  those 
who  have  eyes  with  an  unimpaired  vision,  can  be  de- 
pended on  and  should  give  the  better  results. 

The  amount  of  leaf  fragments,  stems,  dirt,  gin 
cuts  and  color  are  the  elements  that  go  to  make  dif- 
ferences in  grades  of  cotton,  and  to  so  separate 
samples  of  cotton  into  grades  showing  more  or  less 
foreign  matter  and  color,  constitutes  the  requirements 
exacted  by  the  classer  to  tell  how  much  of  this  leaf, 
dirt  and  trash  can  be  admitted  into  a  sample  to  make 
it  a  certain  grade  of  cotton. 

In  order  to  make  classification  as  near  an  exact  art 
as  possible,  a  starting  point  in  classification  is  just  as 
necessary  as  the  classification  itself,  and  this  start- 
ing point  is  known  as  the  ' '  base, ' '  and  the  cotton  tak- 
ing this  base  is  called  ^^ middling,"  or  *^ middling 
basis,"  in  the  vernacular  of  the  cotton  buyer  and 
classer. 

MIDDLING  COTTON. 

Middling  cotton  is  the  basis  grade  in  all  markets, 
and  is  the  universal  standard  by  which  all  other  grades 
are  measured.     It  is  a  white  or  nearly  white  cotton 


38  The  American  Cotton  System 

and  contains  only  a  small  amount  of  foreign  matter. 
To  know  the  middling  grade  is  to  know  the  founda- 
tion of  classification,  and  to  know  it  well  is  to  see  it, 
as  no  description  can  be  made  of  it  sufficiently  clear 
to  give  the  reader  a  definite  idea  in  words  as  to  its 
exact  type. 

All  cotton  bolls  are  enveloped  in  a  covering  of 
triangular  form,  known  as  '^squares,''  and  when  the 
bolls  are  ripe  and  burst,  exposing  the  white,  fluffy 
cotton  protruding  beyond  the  narrow  limits  of  its 
former  prison  cell,  the  squares  are  dead,  easily  crum- 
bled, and  it  is  quite  difficult  to  pick  the  cotton  from 
the  bolls  without  getting  a  portion  or  all  of  the  dried, 
dead  squares  in  small  fragmentary  parts  into  the  cot- 
ton. 

When  the  leaves  of  the  cotton  plant,  from  drouth, 
frost  or  any  cause,  die,  and  are  easily  pulverized,  par- 
ticles of  such  dead  leaves,  dso,  often  get  into  the  cot- 
ton to  a  more  or  less  extent,  governed  by  the  care  or 
carelessness  of  the  picker,  and  these  leaf  fragments  in 
addition  to  that  of  the  squares,  lower  the  classification. 

It  has  been  argued  by  some  classers,  that  if  in  one 
pound  of  clean  cotton  the  gin  throws  the  fragments 
of  one  dead  leaf,  and  the  grade  recognized  as  good 
middling,  two  leaves  would  give  strict  middling  and 
three  leaves  middling  and  so  forth. 

While  this  illustration  can  not  be  used  as  a  deter- 
minate feature  in  making  the  classification  exact,  yet 
it  illustrates  nicely  an  idea  of  the  comparative  amount 
of  leaf-trash  that  might  be  admitted,  and  probably 
serving  as  a  guide  to  the  classer. 

Gin  saws  acting  on  very  dry  leaf,  cut  it  into  very 
small  particles,  and  the  cotton  appears  as  if  the  trash 


Cotton  Classification  39 

had  been  injected  from  a  pepper-box,  and  the  cotton 
is  said  to  be  full  of  ''pin  head"  trash,  which  lowers 
the  grade  more  than  if  leaf  fragments  were  larger. 

When  the  bursting  cotton  bolls  first  appear  in  the 
fields  and  are  gathered  very  soon  afterwards,  that 
cotton  shows  to  be  a  creamy  white  tint,  but  when  al- 
lowed to  remain  for  some  time  exposed  to  sunlight 
its  creamy  color  is  bleached  to  a  white  cotton,  and 
both  ''creamy"  and  white  cottons  are  recognized  as 
cotton  of  ' '  good  color, ' '  and  if  only  a  small  per  cent  of 
leaf  appears  mixed  with  the  cotton  it  is  known  as  mid- 
dling in  grade,  if  either  creamy  or  white. 

Recognizing  middling  cotton  as  the  basis  from  which 
other  grades  and  valuations  are  made,  then  cotton 
showing  less  and  less  leaf  and  stem  will  be  given  a 
higher  classification  and  value,  while  cotton  exhibit- 
ing more  and  more  foreign  substance  will  receive  a 
lower  gradation  and  value,  for  which  grades  above 
and  below  middling  distinctive  names  are  given,  which 
will  be  shown  in  another  portion  of  this  work. 

Light  is  an  indispensable  aid  to  the  classer  in  get- 
ting at  the  relative  value  of  the  grade,  yet  if  exhibited 
in  certain  ways  it  will  prove  flattering  and  cause  a  too 
high  grade  to  be  given.  To  class  cotton  in  the  open 
air  early  in  the  morning  when  the  eastern  sky  has  a 
reddish  halo,  or  to  attempt  to  do  so  late  in  the  eve- 
ning with  a  reddish  tint  in  the  western  horizon,  the 
reflective  effect  on  a  sample  of  cotton  exposed  to  such 
a  light  will  cause  the  sample  to  appear  fully  a  half 
grade  better  than  it  really  is,  hence  such  lights  are 
deceptive  in  their  nature  and  approach  very  nearly 
artificial  lights,  which  are  valueless  for  classification 
purposes.    From  light  to  shade  and  shade  to  light,  as 


40  The  American  Cotton  System 

the  passing  of  clouds  during  the  day,  are  causes  that 
produce  varying  ideas  respecting  gradation,  and  care 
should  be  exercised  to  allow  for  changeable  lights. 

In  classing  cotton  in  bright  sun  light,  a  better  idea 
as  to  the  real  color  of  the  cotton  can  be  had  by  one's 
back  being  turned  towards  the  light  and  the  sample 
opened  in  the  shade  of  the  classer  holding  the  sample. 
To  attempt  to  class  cotton  in  sunlight  reflected  from 
white  or  gray  earth  or  when  snow  is  on  the  ground 
renders  it  difficult  to  do  so.  Constantly  classing  cot- 
ton under  a  light  of  uniforai  character,  as  in  a  build- 
ing with  sufficient  window  light,  to  which  the  classer 
has  become  accustomed,  or  in  the  open  air  to  which 
light  the  classer  has  grown  to  be  familiar,  conduces 
to  effective  and  satisfactory  results. 

Samples  Drawn  for  Classification, — ^With  the  im- 
proved machinery  for  ginning  and  packing  cotton, 
and  in  place  of  the  old  *4int  room^'  into  which  the 
ginned  cotton  fell  like  a  snow  storm,  it  now  passes 
through  condensers  that  press  the  cotton  in  smooth 
'^ bats''  that  fall  in  gentle  folds  one  upon  another  in 
the  bale,  produces  one  from  which  samples  can  be 
drawn  and  opened  as  book  leaves,  making  it  very 
easy  to  see  well  the  true  character  of  cotton  drawn. 
Samples  taken  for  classification  should  not  be  torn 
crosswise,  but  should  be  opened  lengthwise,  a  process 
to  which  one  should  accustom  himself,  as  the  sample 
thus  opened  can  be  examined  with  greater  facility. 
Look  well  for  gin  cuts,  motes y  leaf  fragments,  stem, 
dirt,  tinges,  stains,  and  color,  as  these  are  the  govern- 
'ing  features  determining  the  character  of  the  grade. 
A  sample  of  sufficient  size,  approximately  eight  ounces 
in  weight  should  be  taken,  especially  when  cotton  is 


Cotton  Classification  41 

shipped,  and  a  guarantee  on  classification  accompanies 
the  same. 

When  it  is  known  that  a  bale  of  cotton  weighing, 
say,  500  pounds,  is  the  product  of  one,  two,  five  or 
perhaps  ten  acres  of  land,  a  sample  may  or  may  not 
be  indicative  of  the  true  character  of  the  bale  en- 
tirely, which,  if  not  so,  gives  cause  for  dissatisfaction, 
when  the  whole  bale  is  judged  by  the  sample  offered 
as  its  representative.  If  an  entire  bale  is  gathered 
with  care,  free  from  foreign  substances  and  discolor- 
ations  and  ginned  without  admixtures  of  other  cot- 
ton, then  a  drawn  sample  would  be  a  good  index 
representing  the  true  class  of  cotton  in  the  bale,  but 
when  cotton  is  gathered  with  careless  hands,  foreign 
substances  allowed  to  enter  freely  into  the  cotton  this 
class  of  low  grade  cotton  injected  with  better  picked 
cotton,  makes  a  very  mixed  cotton  in  the  same  bale, 
and  a  sample  taken  from  such  a  bale  would  scarcely 
give  an  idea  as  to  its  literal  class.  This  gives  cause 
for  the  necessity  arising,  requiring  a  sample  taken 
from  both  sides  of  a  bale,  in  an  effort  to  ascertain  the 
true  class  of  cotton  therein,  and  even  a  single  sample 
of  such  cotton  may  not  show  uniformity  in  grade. 

It  is  customary  in  the  New  York  and  New  Orleans 
markets,  and  perhaps  universal  in  all  the  other  mar- 
kets, where  two  samples  of  cotton  are  drawn,  one 
from  each  side  of  the  bale,  to  base  the  value  of  the 
bale  by  the  sample  of  lower  grade,  unless  it  be  shown 
that  the  amount  of  low  grade  cotton  is  too  small  to 
be  reckoned. 

Since  better  ginning  plants  have  been  established 
in  the  cotton  belt,  and  the  tendency  is  to  make  them 
of  greater  capacity  as  to  output,  it  is  not  unusual  to 


42  The  American  Cotton  System 

find  four,  six  and  eight  gin  stands  of  large  size  in  one 
building,  and  since  ginners  usually  retain  a  full 
**roll''  in  each  gin  stand  after  a  bale  is  finished,  and 
when  a  load  of  good  grade  of  seed  cotton  is  passing 
through  the  gin,  having  previously  retained  a  full 
*^roir'  in  all  the  gin  stands  from  the  bale  of  lower 
grade  cotton  just  preceding  it,  this  **roir'  of  inferior 
cotton  makes  one  side,  or  a  *  Opiate''  of  more  or  less 
thickness  on  the  bale  of  good  cotton  following,  and  the 
*^roir'  of  good  cotton  from  this  bale  of  high  grade, 
remains  to  become  a  portion  of  the  next  bale  to  follow. 
Such  method  of  work  necessarily  makes  ^^two  sides'' 
to  a  bale  of  cotton,  that  is  to  say,  the  cotton  shown 
on  one  side  of  the  bale  is  different  in  grade  to  that 
on  the  other  side,  and  where  such  exists,  the  classer 
should  be  careful  to  cut  and  draw  a  sample  sufficiently 
deep  from  the  bale  to  enable  him  to  pass  through  the 
stratum  of  good  or  bad  cotton  and  secure  a  sample 
showing  the  exact  quality  of  the  cotton  beneath  the 
thin  shield  of  different  grade  enveloping  this  one  side. 
Intentional  ^^  Plating' '  Condemned, —  J)Q^\gn.mg 
growers  sometimes  resort  to  practices  the  purpose 
of  which  is  to  deceive  credulous  or  incredulous  buyers, 
by  placing  good  grades  of  cotton  on  each  side  of  a 
bale,  filling  the  middle  portion  with  cotton  of  a  lower 
grade,  in  an  effort  to  have  it  appear  that  the  whole 
bale  is  composed  of  good  cotton,  and  thereby  re- 
ceive a  price  commensurate  with  the  value  of  such 
cotton  as  is  shown  superficially.  Such  practices,  how- 
ever, are  almost  obsolete  and  can  not  be  too  severely 
condemned,  but  to  the  buyer  beginning  the  classifica- 
tion of  cotton  and  launching  out  into  such  fields  of 
work  for  his  future  occupation,  it  is  timely  to  be  well 


Cotton  Classification  43 

advised  on  the  actions  of  unscrupulous  ones  perpe- 
trating such  frauds,  and  he  should  look  with  care  and 
scrutinize  closely  all  bales  of  cotton  offered  for  sale, 
where  cotton  is  bought  in  the  bale,  from  which  samples 
are  drawn.  Such  surveilance  of  the  bale  can  not  be 
had  where  cotton  is  bought  from  factors'  tables  by 
sample  alone,  the  classer  relying  upon  the  integrity 
and  guarantee  of  the  vendor  for  protection  of  his 
purchase  in  most  every  instance. 

Hurried  Harvesting. — Their  hurry  to  harvest  cot- 
ton rapidly,  induces  many  growers  to  enter  the  fields 
early  before  the  dews  of  the  morning  have  faded, 
and  following  closely  after  rainfall,  also,  results  in 
much  wet  cotton  being  gathered,  which  carried  to  the 
ginners  in  this  condition,  gives  rise  for  serious  objec- 
tions being  made  to  such  class  of  cotton,  showing  as 
it  does  much  dampness  and  an  excessive  cutting  of 
the  fibers.  Extreme  dampness  or  water  ^'packs'' 
should  be  looked  after.  Leaks  from  steam  or  water 
pipes  sometimes  give  an  excess  of  moisture  to  a  bale 
of  cotton  when  in  process  of  formation  in  the  press, 
and  the  results  of  such  carelessness  are  as  much  to  be 
deprecated  as  if  the  water  were  injected  by  design. 

Dry  Cotton. — Should  necessity  require  that  cotton 
be  gathered  wet,  it  should  not  be  allowed  to  pass  the 
gins  until  after  it  has  been  thoroughly  dried,  then 
dust,  dirt,  sand  and  much  leaf  and  stem  can  be  elim- 
inated, resulting  in  a  much  better  grade  being  shown, 
while  on  the  other  hand  if  permitted  to  be  ginned  wet 
or  damp,  all  foreign  substances  adhere  with  greater 
tenacity  to  the  fiber,  and  giving,  by  way  of  illustra- 
tion, a  low  middling  grade,  which,  if  it  had  passed 
the  gins  dry,  would  have  produced,  perhaps,  a  mid- 


44  The  American  Cotton  System 

dling  in  classification,  and  a  bale  of  cotton  five  to 
seven  and  a  half  dollars  more  in  relative  value. 

Premium  Values  Are  Offered. — Too  much  encour- 
agement can  not  be  given  to  the  grower  who  exerts 
himself  to  produce  cotton  of  better  quality,  and  the 
tendency  of  the  intelligent  culturist  of  today  is  di- 
rected in  this  line,  as  premium  values  are  offered  as 
a  stimulus  to  those  who  can  and  should  undertake  to 
improve  the  varieties  now  cultivated.  Greater  atten- 
tion should  be  given  to  the  quality  and  not  the  quan- 
tity grown,  and  equal  care  bestowed  on  the  harvest- 
ing and  ginning,  for  on  this  as  much  as  any  part  of 
the  process  depends  the  success  for  securing  high 
grade  cotton  and  good  values. 

Lower  Grades  More  Difficult. — The  classification  of 
the  better  grades  of  cotton,  say,  middling  and  up,  is 
accomplished  with  greater  facility,  and  a  determina- 
tion to  greater  accuracy  is  more  reasonably  certain, 
but  as  the  lower  grades,  those  designated  as  under 
middling,  show  a  preponderance  of  foreign  matter, 
discolorations,  tinges  and  stains,  the  difficulty  for  de- 
termining the  correct,  or  relatively  correct  grade,  in- 
creases as  the  grades  are  lowered.  As  the  gradation 
of  cotton  is  known  as  full,  half  and  quarter  grades, 
and  the  gradation  of  one  so  nearly  harmonizing  with 
its  approximate  grade  either  above  or  below  in  char- 
acter, it  is  quite  difficult  many  times  to  determine  to 
which  class  any  certain  grade  belongs,  and  for  this 
cause,  differences  of  opinion  arise  between  classers, 
and,  indeed,  the  same  classer  passing  upon  a  sample 
of  cotton,  which  had  been  classed  by  him  at  some  pre- 
vious time,  will  differ  from  his  former  opinion.  To 
those  unacquainted  with  cotton  classification,  this  may 


Cotton  Classification  45 

seem  strange,  but  if  questioned,  any  good  classer  will 
confirm  the  statement,  and  upon  this  point,  a  member 
of  the  New  York  Exchange,,  said:  ''There  are  cer- 
tain people  who  say  the  grades  of  cottpn,  or  the  types 
of  cotton  by  which  the  grades  are  determined,  should 
be  mechanically  fixed,  and  that  the  classification  com- 
mittee should  be  required  to  classify  mechanically  in 
accordance  with  those  mechanical  types.  Now  every- 
body who  has  had  any  experience  with  cotton  classers 
knows  that  the  classing  of  cotton  is  not  a  mechanical 
art ;  it  is  the  work  of  the  artist  essentially.  The  good 
cotton  classer  does  not  class  cotton  by  a  mechanical 
standard.  I  have  that  well  illustrated  in-  the  case  of 
one  of  my  own  classers  in  the  South — one  of  the  very 
best  classers  I  have  ever  known — who  could  class  2000 
to  3000  bales  of  cotton  a  day,  and  who  would  turn 
out  the  most  beautiful  lots  .of  even-running  cotton 
that  I  have  ever  seen  in  my  life.  But  a  peculiarity 
of  that  man  was  that  if  he  hesitated  over  a  sample 
and  took  it  up  the  second  time  and  considered  if  he 
was  right  or  wrong,  he  always  got  it  wrong.  *  *  * 
Classing  cotton  is  a  great  deal  more  than  matching 
samples.  It  is  a  matter  of  the  eye  and  the  judgment, 
a  certain  feeling  that  only  a  man  with  an  artistic  tem- 
perament can  have.  All  good  classers  are  in  a  way 
artists.  No  cotton  classer  can  tell  you  why  he  classes 
a  certain  sample  of  cotton  as  strict  low  middling  and 
another  sample  as  strict  middling;  he  just  knows 
that  it  is  so.'' 

An  absolutely  perfect  system  of  classification  for 
cotton,  therefore,  can  not  be  hoped  for. 


46  The  American  Cotton  System 

cotton  standards. 

From  the  foregoing  statements  declaring  the  ab- 
sence of  any  mechanical  measurements  by  which  cot- 
ton can  be  classed  with  absolute  accuracy,  the  ques- 
tion might  arise,  How  then  must  cotton  be  classed, 
and  who  shall  be  the  final  arbiter  in  the  matter?  To 
better  illustrate,  A,  who  is  a  cotton  merchant  and  a 
classer,  ships  50  bales  of  cotton  to  B,  also  a  cotton 
merchant  who  either  classes  or  has  the  cotton  classed 
on  arrival;  A  puts  out  the  shipment  as  even  running 
middling  cotton;  B  states  the  classification  shows  to 
average  five  points  under  middling;  now  both  men 
being  intelligent,  honest,  equal  in  knowledge  of  cot- 
ton classification,  by  whose  decision  shall  the  matter 
be  determined;  shall  the  settlement  be  on  A's  or  B's 
classification?  The  Exchanges  adopt  certain  grades 
of  cotton,  which  grades  are  known  as  the  *^ standard'* 
or  ** standard  grades/'  For  explanation  of  settle- 
ment see  Arbitration. 

STAPLE  COTTON. 

The  name  *' staple  cotton"  is  applied  to  all  cot- 
tons having  long  fibers  or  long  lint.  It  may  be  graded 
and  classed  as  short  fiber  cotton,  that  is,  middling, 
strict  middling  and  so  forth,  speaking  relatively  as  to 
the  amount  of  leaf,  stem,  dirt,  color  and  tinges,  but 
its  merit  value  is  determined  not  alone  by  these  im- 
purities, nor  lack  of  them,  but  by  the  length  of  staple 
as  well.  Cotton  showing  less  length  of  fibers  than  one 
and  one-sixteenth  inch  is  not  recognized  by  cotton  au- 
thorities as  long  staple  cotton,  while  staple  of  this 
length  and  above  bear  valuations  increasing  in  value 


Cotton  Classification  47 

as  the  lengths  increase,  or  in  a  nearly  proportionate 
ratio.  The  strength  of  the  fiber  is  an  element  of  con- 
sideration, and  should  not  be  overlooked  in  passing 
upon  a  sample  of  staple  cotton. 

It  would  seem  from  practice  and  good  judgment 
that  in  efforts  being  made  to  classify  staple  cotton 
that  no  discrepancies  or  difference  could  arise  as  to 
length  of  staple,  but  as  a  matter  of  fact  the  reverse 
frequently  obtains,  as  what  one  classer  would  recog- 
nize as  one  and  one-eighth  inch  staple  another  would 
call  it  one  and  three-sixteenths  or  one  and  one-fourth 
inch,  while,  perhaps,  another  might  still  pronounce  it 
one  and  five-sixteenths,  each  being  equally  honest  in 
his  judgment.  These  seeming  differences  can  be  har- 
monized on  the  theory  that  one  classer  in  going 
through  a  list  of  samples  may  draw  fibers  measuring 
one  and  one-eighth  inch,  while  another  classer  operat- 
ing on  the  same  samples  will  draw  fibers  actually 
measuring  one  and  3-sixteenths  or  one  and  one-fourth 
inch  in  length  and  so  pronounce  it.  This  is  because 
saw  gins  acting  on  staple  cotton  break  it  more 
or  less,  resulting  in  the  production  of  a  grade  of  cot- 
ton showing  uneven  lengths,  and  causing  want  of 
harmony  among  classers  as  to  the  exact  leng]:h  of 
staple. 

The  length  of  the  staple,  although  an  extremely  im- 
portant matter  in  determining  the  spinning  value  of 
cotton,  is  a  distinct  consideration,  as  well  as  the  ten- 
sile strength  of  the  fibers,  and  a  classer  in  attempting 
to  give  a  value  to  such  characteristics  should  know 
well  their  true  merits. 


48  The  American  Cotton  System 

relative  grades. 

Middling  cotton  being  the  basis  grade  from  which 
all  the  other  grades  are  figured,  each  grade  repre- 
sented as  being  above  or  below  middling  in  class  has 
a  relative  value  compared  to  middling.  Middling 
being  recognized  as  a  white  cotton  or  nearly  so,  is 
a  fleecy  cotton  containing  only  a  small  portion  of 
foreign  matter,  strict  middling  a  less  quantity,  good 
middling  still  less,  middling  fair  almost  free  from 
any  impurity,  while  fair  cotton  is  entirely  free  from 
all  contaminations  of  other  substances,  white  or 
creamy  and  perfectly  ginned — the  highest  grade  given 
to  any  class  of  cotton. 

Descending  the  scale  from  middling  through  the 
entire  list  of  lower  grades — those  below  middling  be- 
ing known  as  the  lower  grades — the  values  of  these 
grades  decrease  as  the  grades  become  lower  in  type, 
which  fact  is  known  by  the  increasing  excess  of  for- 
eign matter  injected  therein,  until  ordinary  is  reached, 
the  lowest  grade  of  white  cotton. 

There  are  thirteen  distinct  grades  of  cotton  very 
generally  recognized  in  the  spot  cotton  markets  of 
the  country,  as  follows : 

Fair.  Strict  low  middling. 

Strict  middling  fair.  Low  middling. 

Middling  fair.  Strict  good  ordinary. 

Strict  good  middling.  Good  ordinary. 

Good  middling.  Strict  ordinary. 

Strict  middling.  Ordinary.* 

Middling. 


♦Secretary   Wilson,    of    the    United    States    Agricultural 
Department,  in  conforming  with  an  act  of  Congress  to  es- 


Cotton  Classification  49 

The  grades  shown  as  fair,  middling  fair,  good  mid- 
dling, middling,  low  middling,  good  ordinary,  and 
ordinary  are  known  as  the  *'full  grades,''  while  the 
stricts  are  designated  as  ^'half  grades,''  between  them 
in  class  the  ''quarter  grades"  or  ''splits"  have  a 
recognized  value  among  spot  cotton  buyers.  These 
grades  cover  the  class  known  as  white  cottons,  and 
as  more  or  less  cotton  is  unavoidably  left  each  sea- 
son exposed  to  the  changes  in  the  weather,  the  range 
of  grades  become  wider  as  discolored,  tinged,  and 
spotted  cottons  are  shown  as  results  of  exposure, 
giving  cause  for  such  grades  as  middling  tinged, 
middling  stained,  strict  middling  stained  and  so 
on. 

The  discolored  cottons  are  in  a  separate  class  dis- 
tinct from  the  white  cottons. 


tablish  standard  grades  of  cotton,  called  together 
several  expert  cotton  classers  from  different  parts  of  the 
cotton  belt,  who,  acting  with  three  experts  of  the  Depart- 
ment, established  the  nine  grades  known  as  middling  fair, 
strict  good  middling,  good  middling,  strict  middling, 
middling,  strict  low  middling,  low  middling,  strict  good 
ordinary,  and  good  ordinary. 

The  samples  from  which  these  types  were  selected  were 
gathered  from  the  different  exchanges  and  boards  of  trade 
from  different  parts  of  the  United  States  and  the  large 
Exchanges  of  Europe,  and  from  this  large  number  of 
samples  the  nine  were  selected  to  be  known  as  the  o3cial 
standards  or  commercial  grades. 

With  these  types  as  guides,  the  Department  will  prepare 
others  of  similar  or  parallel  description,  to  be  boxed  and 
sold  to  whomsoever  may  be  sufficiently  interested  to  pay 
the  cost  for  samples  and  doing  the  work. 

The  committee  of  experts  establishing  the  nine  grades 
of  cotton,  finished  its  work  about  February  5,  1909,  after 
having  been  in  session  for  several  days. 

The  act  of  Congress  requiring  the  Secretary  of  Agricul- 
ture to  establish  the  official  type  standards  was  the  result 
of  the  efforts  of  Congressman  Burleson  of  Texas. 
4 


50  The  American  Cotton  System 

grades  tenderable  on  future  contracts. 

The  New  York  Cotton  Exchange  formerly  recog- 
nized thirty  grades  of  cotton,  representing  what  it 
called  the  official  list  tenderable  on  future  contracts, 
but  on  and  after  April  1,  1908,  this  list  had  been  re- 
duced to  18  and  so  remains  now,  and  is  as  follows : 

Fair.  Strict  good  ordinary. 

Strict  middling  fair.  Good  ordinary. 

Middling  fair.  Strict  good  middling  tinged. 

Strict  good  middling.  Good  middling  tinged. 

Good  middling.  Strict  middling  tinged. 

Strict  middling.  Middling  tinged. 

Middling.  Strict  low  middling  tinged. 

Strict  low  middling.  Low  middling  tinged. 

Low  middling.  Middling  stained. 

These  grades  are,  according  to  the  rules  of  the  New 
York  Exchange,  deliverable  on  any  future  contracts 
bought  or  sold  through  this  Exchange.  That  is,  if 
one  buys  a  hundred  bales  of  cotton  through  any  mem- 
ber of  this  Exchange,  the  seller  has  the  right  (option) 
to  deliver  any  of  the  above  grades  on  said  contract, 
which  is  based  on  middling  cotton,  with  the  differ- 
ences in  value  compared  to  middling.  All  grades 
above  middling  commanding  a  premium — all  below, 
a  discount.  The  premiums  above,  and  discounts  be- 
low middling  do  not  always  remain  the  same,  the 
variations  arising  from  contingencies  uncontrollable, 
such  as  rains,  winds,  and  good  weather,  which  give 
low,  medium  or  high  grade  cottons  to  a  greater  or  les- 
ser extent  according  to  the  weather  obtaining,  and  if 
much  low  grade  cotton  appears  in  the  markets  the 


Cotton  Classification  51 

tendency  is  to  widen  the  differences  and  lower  the 
price,  for  when  such  grades  are  increased  in  number 
while  the  possibility  of  higher  premiums  being  of- 
fered for  the  high  grades  is  greater,  but  when  the  re- 
verse is  true  as  to  the  character  of  the  cotton  ap- 
pearing, the  differences  in  the  values  become  changed 
in  the  same  ratio;  that  is,  much  low  grade  cotton  on 
the  market  induces  lower  values,  or  wider  differences 
in  value  below  middling;  a  high  average  or  large 
quantities  of  good  cotton  narrows  the  differences 
above  middling  many  times. 

DIFFERENCES.* 

The  expressions,  ** differences  in  grades,''  differ- 
ences in  values,''  are  terms  used  in  a  relative  way 
which  one  often  hears  from  those  interested  in  the 
cotton  trade.  The  expressions  are  well  used  and  most 
applicable,  and  can  be  readily  understood  when  tab- 
ulated statements  are  shown  as  here  presented,  and 
when  once  understood  are  easily  remembered. 

Recognizing  middling  as  the  basis,  the  other  grades 
and  values  are  easily  shown.  Say,  middling  is  worth 
10  cents  a  pound,  and  showing  the  ''full"  and  ''half" 
grades  in  the  table,  and  all  above  middling  as  "on" 
or  above,  and  the  grades  below  middling  as  "off"  or 
below. 


♦Values  other  than  M.  being  established  twice  each  year 
by  the  New  York  Cotton  Exchange  revision  committee,  are 
known  as  the  -fixed  differences,  while  those  made  monthly 
by  the  New  Orleans  Cotton  Exchange  revision  committee, 
being  based  on  the  value  of  cotton  in  the  market  at  the 
time,  are  recognized  as  the  commercial-differences. 


52  The  American  Cotton  System 

Grades.  Price.  Price.  Price. 

Cents.  Cents.  Cents. 


Good   middling . . . 

.       101/4 

103/8 

101/2 

Strict  middling. . . 

.         101/8 

lOA 

101/4 

Middling   (Basis) . 

.       10 

10 

10 

Strict  low  midl'g. 

97/8 

9% 

91/4 

Low  middling. . . . 

91/2 

9 

8I/2 

The  five  grades  shown  are  sufficient  to  explain  the 
differences  in  grades  and  the  three  different  prices 
shown  will  illustrate  the  idea  of  differences  in  value. 

In  the  first  price  column  the  difference  in  value 
for  strict  middling  above  middling  is  %  ''up;"  for 
good  middling  14  ' '  up ; "  the  difference  in  the  second 
price  column  for  strict  middling  above  middling  is 
xV  ''iiP;"  for  good  middling  %  ''up;"  while  in 
the  third  price  column  the  difference  for  strict  mid- 
dling above  middling  is  %  ^^up;"  for  good  middling 
1/2  "up."  In  the  first  price  column  the  price  "off" 
middling,  or  less  than  middling  for  strict  low  mid- 
dling in  value,  is  % ;  in  the  second  price  column,  the 
difference  in  value  is  %  less,  while  in  the  last  or  third 
price  column  the  difference  is  %  less  than  middling. 
In  the  first  price  column  for  low  middling  I/2  is  "off" 
in  value,  while  in  the  second  and  third  price  columns 
100  and  150  points  (1  and  1%)  are  taken  off  respec- 
tively, in  giving  the  relative  value  for  this  grade. 

It  is  not  unusual  to  see  these  differences  applied 
on  low  middling  grade,  but  the  differences  as  shown 
here  for  strict  low  middling  are  out  of  the  line  of  the 
ordinary,  and  are  given  here  for  purpose  of  explana- 
tion only,  especially  the  one  showing  %  "off"  for 
strict  low  middling. 


Cotton  Classification  53 

While  weather  changes  are  unavoidable  circum- 
stances that  produce  varieties  of  grades,  and  are  in- 
strumental in  determining  in  many  instances  relative 
values  for  them,  a  committee  known  as  the  Commit- 
tee on  Kevision  of  Quotations  of  Spot  Cotton  of  both 
the  New  York  and  New  Orleans  Cotton  Exchanges, 
exercise  the  right  to  revise  the'  price  of  relative  grades, 
saying  how  much  difference  in  price  shall  be  put 
''on''  or  ''off"  middling  cotton,  thus  two  factors  are 
conducive  to  changes  in  relative  values;  the  charac- 
ter of  the  cotton  gathered  as  to  an  excess  or  scarcity 
of  foreign  substances,  and  the  action  of  the  Revision 
Committee,  whose  deliberations  and  decisions  are  gov- 
erned by  the  type  of  cotton, ' '  state  of  the  market ' '  and 
the  actual  price  for  which  spot  cotton  has  been  sold 
in  the  market  during  the  day  (New  Orleans). 

REVISION   COMMITTEE  OF  THE  NEW   YORK    COTTON 
EXCHANGE. 

This  committee  is  one  of  the  most  important  con- 
nected with  the  Exchange;  the  results  of  its  delib- 
erations are  far-reaching  in  scope  and  exercise  great 
power  over  the  market  many  times,  and  it  has  been 
alleged  that  in  the  performance  of  its  functions,  it 
has  at  times  gone  beyond  its  legitimate  bounds  by 
creating  differences  too  broad,  relative  values  too  ab- 
normal fo  be  salutary  to  the  trade. 

It  is  not  the  purport  of  this  volume  to  assert  or  deny 
the  truthfulness  of  such  allegations,  but  only  to  as- 
sert the  existence  of  such  a  committee,  the  character 
of  its  duty,  commenting  only  on  the  results  of  its  ac- 
tions. 


54  The  American  Cotton  System 

Quoting  from  the  Charter,  By-Laws,  and  Rules 
of  the  New  York  Cotton  Exchange,  the  duties  of  the 
Revision  Committee  are  clearly  set  forth  in 

Sec.  67.  The  Committee  on  Revision  of  Spot  Cot- 
ton shall  consist  of  seventeen  members,  representing  the 
various  interests  of  the  Exchange.  At  any  meeting  of 
this  Committee  ten  members  shall  constitute  a  quorum. 
If  no  quorum  of  this  Committee  can  be  obtained,  the 
President  shall  appoint  a  sufficient  number  of  members 
of  the  Exchange  to  form  a  quorum. 

The  duty  of  this  Committee  shall  be  to  meet  twice  a 
year,  viz.:  on  the  second  Wednesday  of  September  and 
the  third  Wednesday  of  November,  at  three  thirty  o'clock 
p.  m.,  and  receive  a  report  from  the  Committee  on  Spot 
Quotations  as  to  the  state  of  the  market;  also  sugges- 
tions or  opinions  from  any  member  of  the  Exchange 
regarding  the  revision  of  spot  quotations. 

The  Committee  shall  on  the  day  of  meeting  consider 
the  report  of  the  Committee  on  Spot  Quotations  and  the 
suggestions  and  opinions  presented  by  members,  whether 
in  writing  or  verbally  and  establish  the  differences  in 
value  of  all  grades,  on  or  off  middling  cotton,  which  shall 
constitute  the  rates  at  which  grades  other  than  mid- 
dling may  be  delivered  upon  contract. 

Should  any  day  appointed  for  a  meeting  of  this  Com- 
mittee fall  upon  a  holiday,  the  Committee  shall  meet 
upon  the  next  business  day. 

Copying  from  Charter,  Constitution,  By-Laws  and 
Rules  of  the  New  Orleans  Cotton  Exchange,  its  amend- 
ed rule,  effective  March  3,  1908. 

Rule  16.  The  Board  of  Directors,  at  their  first  meet- 
ing after  election,  shall  appoint  a  standing  committee 
of  thirty  (30)  members,  from  which  committee  the  Board 
shall  select  monthly  five  members,  who  shall  constitute 
the  Committee  on  Spot  Quotations,  etc. 

The  Committee  on  Spot  Quotations  shall  make  up  the 
oflicial  spot  market  report  of  the  Exchange  daily  at  2 
p.  m.,  except  on  Saturdays,  when  they  shall  meet  at 
11:45  a.  m.;  provided  that  when  one  or  more  of  the 
members  of  the  Spot  Quotation  Committee  think  that 
there  should  be  a  change  in  the  differences  between 
grades,  or  in  the  differences  for  off-colored  cotton  and 
stained  cotton,  he  or  they  shall  notify  the  Secretary  of 


Cotton  Classification  55 

the  Exchange  by  12  noon  on  that  day  (except  on  Satur- 
days, when  notice  must  be  given  by  10  a.  m.),  and  it 
shall  be  the  duty  of  the  Secretary  to  immediately  notify 
the  other  members  of  the  Spot  Quotation  Committee  and 
also  the  members  of  the  Arbitration  Committee  on  Classi- 
fications that  the  matter  of  changing  such  differences  is 
to  be  considered  at  a  joint  meeting  of  the  two  commit- 
tees to  be  held  at  2  o'clock  p.  m.,  on  the  same  day  (ex- 
cept on  Saturdays,  when  the  meeting  will  be  at  11:45 
a.  m.);  eight  members  shall  constitute  a  quorum;  the 
chairman  of  the  Spot  Quotation  Committee  shall  act  as 
chairman,  but,  in  the  event  of  his  absence,  the  mem- 
bers shall  choose  a  chairman  for  the  occasion.  A  ma- 
jority vote  of  the  members  present  of  the  combined  com- 
mittees shall  be  necessary  to  make  any  changes  in  the 
differences  between  grades,  or  in  the  differences  for  off- 
colored  and  stained  cotton,  and  no  changes  in  said  dif- 
ferences shall  be  made  except  at  a  joint  meeting  of  the 
two  committees,  as  provided  above,  or  at  the  monthly 
meeting  of  the  Revision  Committee,  as  hereafter  pro- 
vided; provided  further,  that  no  one  who  is  at  the  time 
engaged  in  the  receipt  or  delivery  of  cotton  on  contract, 
or  who  has  same  in  contemplation,  either  as  principal 
or  agent,  shall  be  eligible  to  act  at  such  meeting;  and 
it  shall  be  the  duty  of  the  chairman  of  the  meeting  to 
call  attention  of  the  members  to  this  provision  before 
a  vote  is  taken. 

The  Committee  on  Spot  Quotation,  together  with  the 
Arbitration  Committee  on  Classifications,  shall  constitute 
a  Revision  Committee,  whose  duty  it  shall  be  to  revise 
quotations  on  the  first  Friday  of  each  month,  or,  should 
such  Friday  occur  on  a  holiday,  on  the  first  business  day 
thereafter. 

The  report  of  said  Revision  Committee  shall  consti- 
tute the  official  quotations  on  the  day  of  its  meeting. 

The  Superintendent  of  the  Exchange  shall  post  upon 
the  boards  the  state  of  the  spot  market  each  day  between 
the  hours  of  12  a.  m.  and  1  p.  m. 

From  tlie  foregoing  the  conclusion  follows  as  stated 
in  the  last  paragraph,  that  an  approach  is  made  to- 
wards a  point  where  market  quotations  are  made 
public  by  some  one  for  cotton,  or  rather,  some  one 
or  several,  state  a  price  they  are  willing  to  give  or 
take  for  cotton,  which  prices  are  posted  on  the  boards 


56  The  American  Cotton  System 

of  the  great  Exchanges  and  go  out  over  the  wires  as 
market  quotations  for  futures  and  spot  cotton,  creat- 
ing a  desire  to  know  more  fully 

HOW    COTTON    markets    ARE    MADE. 

While  the  rules  of  the  New  York  Cotton  Exchange 
are  not  entirely  dissimilar  to  those  of  New  Orleans, 
they  approach  so  nearly  in  many  respects  that  a  de- 
scription of  the  daily  working  of  one,  will  suffice 
for  both.  A  description  of  a  day's  proceedings 
on  the  floor  of  the  New  Orleans  Cotton  Exchange 
will  be  of  interest  to  those  unacquainted  with  its  in- 
ner workings  in  establishing  in  the  minds  of  the  read- 
er the  facts  that  contribute  to  the  establishing  of 
figvires  that  are  placed  upon  the  blackboard  in  the 
Cotton  Exchange,  which  figure  valuations  are  flashed 
over  the  wires  as  market  values  for  cotton. 

The  New  Orleans  Cotton  Exchange  opens  its  doors 
at  S  a.  m.  At  that  time  there  are  posted  on  the  black- 
board, reserved  for  the  Liverpool  market,  the  opening 
prices,  then  the  noon  prices  and  the  2  p.  m.  quotations, 
as  Liverpool  is  six  hours  ahead  in  time.  Members  be- 
gin to  congregate,  but  no  trading  in  futures  is  done 
until  9  :05  a.  m.  At  nine  o  'clock  quotations  begin  to 
arrive  from  New"  York  which  market  opens  at  10  a. 
m.,  Eastern  time,  equal  to  9  a.  m.  New  Orleans  time. 
At  five  minutes  past  9  a.  m.  the  future  business 
starts  for  the  day  by  the  official  call.  This  is  made 
by  the  Secretary  of  the  Exchange  or  the  assistant 
secretary  stepping  upon  the  rostrum  seizing  a  wooden 
gavel  and  by  a  blow  with  it  upon  the  rostrum  open- 
ing the  trading. 

He  calls  out  the  current  month — the  month  exist- 


Cotton  Classification  57 

ing  at  the  time,  it  being  the  first  trading  month,  and 
continues  to  call  all  the  twelve  months,  beginning 
with  the  existing  month,  and  ending  with  the  twelfth 
month   thereafter. 

Each  month  is  called  aloud  in  a  way  that  it  can 
be  heard  everywhere  on  the  floor,  and  sufficient  time 
is  given  until  the  price  for  that  month  is  stationary 
before  the  next  month  is  called.  Every  trade  made 
during  the  call  is  repeated  aloud  by  the  secretary :  for 
instance  Smith  &  Jones  sell  to  Williams  &  Brown; 
the  secretary  would  call  out,  ''Smith  &  Jones  to  Wil- 
liams &  Brown,  one  January  at  9  cents,''  and  this 
trade  as  well  as  all  others,  are  recorded  on  the  black- 
board reserved  for  New  Orleans  quotations  and  there 
visible  to  everybody.  Besides  that,  there  is  one,  or, 
if  trading  is  very  active,  two  Exchange  officials  stand- 
ing inside  the  ring  marking  down  throughout  the  day 
until  2:30  p.  m.,  when  trading  officially  closes,  every 
trade  that  is  made  in  futures,  price,  by  what  broker- 
age house  it  is  sold,  and  by  what  brokerage  firm  it  is 
bought,  and  the  time  the  trade  is  made.  All  this  goes 
on  the  blackboard  and  is  kept  on  record  in  the  Ex- 
change office. 

A  portion  of  the  Exchange  floor  is  set  aside  for  this 
future  business,  but  is  accessible  to  all  members  with- 
out discrimination.  In  this  portion  is  the  so-called 
Ring  or  Pit,  a  circular  structure  for  the  purpose  of 
preventing  jamming  and  confusion  among  the  many 
brokers  who  assemble  around  it  to  execute  their  or- 
ders. 

After  the  ''cair'  is  over,  trading  across  the  Ring 
is  done  in  all  the  twelve  months  or  ''positions"  in- 
stead of  only  the  month  called,  and  this  character  of 


58  The  American  Cotton  System 

trading  where  the  membership  call  aloud  their  trade 
across  the  ring  to  each  other  is  known  as  ^^ring-trad- 
ing'' or  *^ring  trades/'  and  as  stated,  occurs  during 
the  intervals  between  the  opening  and  noon  calls,  and 
noon  and  close  calls.  One  broker  may  call  out  that 
he  wants  to  sell  a  March  (contract)  at  9.03,  while 
others  may  offer  to  buy  March  at  9.02,  others  may, 
again,  cry  out  they  want  to  buy  May  at  9.10,  others 
offer  to  sell  July  at  9.18  and  so  on. 

As  before  stated,  if  a  trade  results  it  is  at  once  re- 
corded and  put  upon  the  blackboard.  No  trading  is 
allowed  by  private  agreement.  All  trades  between 
brokers  for  third  account  must  be  made  by  loud  out- 
cry across  the  ring.  There  is  a  heavy  fine  imposed 
by  the  rules  of  the  Exchange  for  any  violation  of 
this  rule,  going  as  far  as  suspension  from  business,  or 
expulsion  from  the  Exchange. 

If  the  secretary  calls  a  month  during  the  official 
calls  and  no  one  offers  to  trade  during  the  time  the 
month  is  called  out  three  times,  then  he  knocks  it 
down  as  ^'None. " 

If  some  one  offers  to  buy  at  a  certain  figure,  but  no 
one  offers  to  sell,  he  calls  out,  say,  *^  Smith  &  Jones, 
January  bid  9  cents,"  and  after  having  called  this 
out  three  times,  he  knocks  it  down  as  January  bid 
9  cents  and  vice  versa,  if  a  broker  offers  to  sell,  say 
March  at  9.03,  the  secretary  making  the  call  cries  out, 
for  instance,  ^^  Smith  &  Brown,  March,  offered  at 
9.03,"  and  after  having  done  so  three  times  he  knocks 
it  down  as,  ''March,  offered  at  9.03." 

The  call  in  any  position  (month)  is  over  when  the 
price  does  not  vary  any  more  after  having  been  called 


Cotton  Class'tfication  59 

three  times,  marked  each  time  with  a  blow  from  the 
gavel. 

Brokers  in  offering  to  buy  or  sell  contracts  are  gov- 
erned by  the  prices  their  customers  make  for  them 
in  many  instances,  but  if  no  price  accompany  the 
orders  and  are  not  restricted  as  to  limitations  of  them, 
then  they  exercise  their  own  judgment  to  do  the  best 
they  can  for  their  customers.  The  broker  has  to  con- 
sider the  showing  of  the  other  markets  such  as  New 
York,  Liverpool,  Bremen,  etc.,  the  general  tendency, 
speculative  feeling,  other  news  at  hand  that  can  be 
construed  as  guiding  factors,  in  fact,  any  and  every- 
thing that  could  influence  the  trading,  and  it  is  ap- 
parent that  everybody  else  is  doing  the  same  thing, 
the  execution  of  the  deals  are  said  to  be  governed 
finally  on  -supply  and  demand  of  contracts  for  the 
month  or  months  he  has  to  deal  in.  If  he  finds  no 
buyer  at  the  price  at  which  he  offers  to  sell,  then  he 
has  to  come  down  until  he  meets  the  demand,  con- 
trarily,  if  he  finds  no  seller  at  his  bid,  then  he  bids 
up  until  he  meets  the  supply.  So  far  as  a  literal 
transaction  is  concerned  there  is  no  difference  in  the 
theory  of  a  trade  whether  in  actual  cotton  or  in 
futures.  Trading  in  futures  are  said  to  be  elements 
that  facilitate  exchanges  in  actual  commodities. 

The  New  York  and  New  Orleans  Cotton  Exchanges 
are  chartered  institutions,  entirely  independent  in . 
their  relationship,  and  trading  in  futures  on  either 
Exchange  is  not  controlled  by  any  stipulated  agree- 
ment between  them.  The  prices  recorded  in  New 
York  or  Liverpool  have  a  significant  influence  in  de- 
termining trade  quotations  on  the  New  Orleans  Ex- 
change.    If  Liverpool  is  higher,  it  reflects  a  buying 


60  The  American  Cotton  System 

power  or  buying  disposition  there.  If  New  York  is 
lower,  it  may  mean  that  some  cause  has  created  a 
preponderance  of  sellers,  and  so  on.  If  Liverpool  or 
New  York  show  higher  markets,  more  buying  orders 
drift  to  the  New  Orleans  market,  if  this  market  has 
not  responded  at  once  to  the  other  market  advances, 
but  when  an  influx  of  orders  from  the  other  markets 
or  any  source  pour  into  New  Orleans,  this  stimulus 
causes  an  advance  there,  and  should  the  New  Orleans 
market  make  an  important  move,  the  trade  in  the 
North  and  abroad  is  likely  to  consider  it  and  give 
orders  accordingly,  which  find  expression  in  the  prices 
recorded  in  New  York  and  Liverpool. 

Exchange  Market  Quotations. — Members  of  both 
the  New  York  and  New  Orleans  Cotton  Exchanges 
affirm  they  do  not  make  quotations  as  cotton  values, 
but  instead,  the  prices  are  made  by  the  buyers  and 
sellers  of  orders  themselves  through  their  brokers  on 
the  Cotton  Exchanges.  It  will  be  noted  in  the  preced- 
ing, that  brokers  are  called  upon  at  times  to  exercise 
their  own  ability  and  judgment  in  saying  what  shall 
be  the  price  to  sell  or  buy  a  March,  June  or  August 
contract,  when,  especially,  a  buyer  or  seller  has  given 
them  no  price  nor  limit,  then  it  is  certainly  evident 
upon  its  face  that  in  this  instance  the  broker  is  in- 
strumental in  making  quotations  for  futures.  Now, 
if  Williams  &  Clark  of  Liverpool  transmit  an  order 
to  a  broker  on  the  New  Orleans  Cotton  Exchange  for 
the  purchase  of  5000  bales  of  May  cotton  at,  say,  9 
cents,  and  the  broker  succeeds  in  buying  it  at  that 
figure,  then  the  Liverpool  buyers  are  instrumental 
themselves  to  that  extent  in  making  the  market  quo- 
tation, although  they  may  be  spinners,  manufactur- 


Cotton  Classification  61 

ers,  brokers  or  cotton  merchants,  likeWise  some  specu- 
lator or  manufacturer  may  think  the  market  already 
high,  and  place  an  order  with  a  New  Orleans  broker 
to  sell  1,000,  5,000  or  10,000  bales  of  May  cotton  at 
8.95,  then  in  this  instance  this  seller  proves  to  be  a 
factor  inducing  a  decline  in  the  market  and  to  this 
extent  is  instrumental  in  affecting  quotations,  if  his 
sale  can  be  made  at  the  figure  offered.  In  such  in- 
stances when  the  opinions  of  individuals  differ  as  to 
the  future  of  the  market,  some  thinking  an  advance 
will  occur,  others  believing  the  market  about  as  high 
as  it  will  go,  for  the  time  at  least,  and  when  such  opin- 
ions are  about  equally  balanced  between  those  operat- 
ing on. the  Exchanges,  the  market  is  said  to  be  very 
stable,  as  those  who  think  it  should  go  higher 
(** bulls '0  can  not  well  push  it  up  because  of  the 
fact  of  the  adverse  element  (^^bears")  those  who  think 
it  should  go  lower — constantly  offer  to  sell  on  all  ad- 
vances and  in  this  way  prevent  an  advance  and  make 
an  equilibrium. 

When  the  opinion  is  prevalent  universally  that 
causes  exist  which  within  themselves  so  materially  af- 
fect the  output  of  cotton  that  an  advance  is  sure  to 
manifest  itself,  then  everybody  wants  to  buy  cotton 
and  buyers  bid  freely  and  above  each  other  to  get  it, 
in  so  doing  their  own  efforts  induce  higher  values, 
and  such  manipulations  sometimes  carry  the  quota- 
tions to  an  abnormal  limit,  that  is  abnormal  as  con- 
strued by  the  buying  (consuming)  element. 

Facts  exist  sometimes  that  are  so  conclusive  that  an 
advance  in  prices  can  not  occur,  which  so  affect  those 
operating  on  the  Exchanges  or  independently,  they 


62  The  American  Cotton  System 

all  become  '^bears''  and  operate  on  the  *sliort  side, 
and  the  market  constantly  declines  until  it  reaches 
a  point  where  the  consumer  will  take  it  at  the  prices 
offered  and  when  this  consuming  power  is  sufficient  in 
strength  to  absorb  all  offerings  then  the  market  de- 
clines no  further,  and  equally  so  in  a  correlative  way, 
where  the  buying  power  is  constantly  advancing  quo- 
tations, a  limit  on  the  advance  is  reached  when  the 
cotton  nor  a  contract  for  it  can  be  sold  at  or  above 
the  quoted  figure,  then  we  logically  conclude  that  the 
consuming  powers  act  as  a  throttle  valve  in  govern- 
ing finally  the  determination  of  prices  for  both  spot 
and  future  cotton — the  final  arbiters  in  the  matter. 

Prices  offered  by  buyers  and  sellers  for  futures 
are  recorded  on  the  Exchange  board  and  recognized 
a^  quotations  for  futures,  and  on  these  future  quo- 
tations the  prices  of  spots  (spot  cotton)  keep  in  line, 
that  is,  if  futures  advance,  spots  follow :  if  futures  de- 
cline, spots  respond,  but  spots  do  not  always  make 
the  same  degree  of  advancement  or  decline  that  show 
in  future  fluctuations. "**  These  recorded  prices  for 
future  quotations  as  shown  on  the  three  great  Ex- 
changes, are  indicative  of  what  is  going  on  in  the 
cotton  world;  taking  the  Exchanges  as  barometric  in- 
dicators of  the  cotton  trade. 


(^3 
*See  page  -SVS  for  fuller  explanation. 

**For  getting  the  value  of  spot  cotton  on  any  market 
as  shown  by  the  Exchanges,  see  page  268. 


CHAPTER  III. 
EXCHANGES.* 

The  word  '*  exchange ' '  means  literally  to  swap, 
barter  one  thing  for  another,  give  value  for  value, 
and  when  so  used  is  non-restrictive  in  sense  with  a 
verb  significatioi;i,  but  in  this  work  the  word  is  re- 
ferred to  as  a  noun  denoting  a  place  where  cotton 
business  is  transacted. 

To  transact  a  business  where  commodities  of  one 
class  are  exchanged  for  another,  more  especially  those 
pertaining  to  agriculture,  it  is  quite  essential  and 
certainly  preferable,  that  a  place  be  established  most 
convenient  to  all,  where  such  transactions  can  be  had 
with  best  inducements  that  can  be  offered  to  facili- 
tate trading  and  that  with  least  expense. 

By  virtue  of  an  unwritten  law  in  most  all  instances, 
as  well  as  municipal  legislative  enactment  in  some, 
every  hamlet,  village,  town  and  city  in  the  South  has 
set  aside  certain  streets  or  parts  of  them,  squares 
and  places,  where  the  grower  may  come  with  his  cot- 


*Tlie  rules  of  the  New  Orleans  Exchange  prescribe  no 
definite  number  constituting  its  membership,  nor  is  the 
initiation  fee  stated,  but  the  annual  dues  are  $100. 

The  membership  of  the  New  York  Cotton  Exchange  is 
limited  to  450  members;  initiation  fee  $500;  the  annual 
dues  are  such  as  "may  be  fixed  by  the  Exchange,"  and 
"levied  from  time  to  time  by  the  Board  of  Managers." 

When  a  sale  of  the  rights  of  membership  is  ordered,  it 
shall  be  "posted  for  ten  days  on  the  bulletin  of  the  Ex- 
change," and  sale  made  "to  the  highest  bidder  at  open 
outcry,"  the  results  of  such  sale  often  reach  high  into  the 
thousands  of  dollars. 


64  The  American  Cotton  System 

ton  to  market  and  offer  it  for  sale;  where  the  buyer 
meets  the  seller,  and  where  sales  are  consummated; 
here  the  seller  can  sell  his  bale  of  cotton  on  his  wagon ; 
sell  one  to  be  picked  next  week,  or  sell  his  whole  crop, 
whether  few  or  many  bales,  by  agreement  with  the 
buyer,  and  deliver  in  one,  two,  or  three  days,  weeks 
or  months;  here  the  seller  knows  to  be  the  place 
where  he  is  to  offer  his  cotton  for  sale ;  here,  the  buy- 
er's  interests  are  centered  and  here  is  a  legitimate 
exchange  place. 

Such  an  exchange  has  no  rules  as  governing  factors, 
further  than  the  sanction  of  custom.  It  has  no  mem- 
bership, and  there  are  no  plans  nor  prices  for  initia- 
tion.    The  sellers  and  buyers  are  its  patrons. 

The  character  of  such  an  exchange  is  familiar  to 
all,  and  while  it  is  commonplace,  the  importance  of 
such  a  place  where  cotton  transactions  can  be  had 
can  best  be  verified  in  a  negative  way  and  show  its 
value  with  more  emphasis. 

While  such  places  are  usually  without  shelter  and 
not  recognized  by  a  large  percentage  of  dealers  as 
an  exchange,  yet  the  purposes  for  which  they  are  al- 
lowable fulfill  its  requirements  in  all  particulars  ex- 
cept transactions  in  future  contracts,  in  contradis- 
tinction to  dealings  .  of  such  character  on  the  New 
York  and  New  Orleans  Cotton  Exchanges,  or  any 
other  organized  Exchange. 

It  is  said,  ''You  never  know  the  value  of  water 
until  the  well  goes  dry, '  ^  so,  negatively  we  do  not  know 
the  value  of  an  open  street  exchange,  until  deprived 
of  it. 

Suppose  John  Smith  comes  to  Smithville,  a  town 
of  2,000  inhabitants,  to  sell  three  bales  of  cotton,  and 


Exchanges  65 

is  met  by  the  city  marshall,  and  told  he  can  not  sell 
his  cotton  on  any  of  the  streets  of  Smithville.  **How 
and  where  can  I  sell  it?"  asks  Smith.  ^'Outside  of 
town — any  where  you  can/'  the  marshall  replies. 

Now,  if  there  is  no  place  outside  of  town,  only  the 
broad  country,  with  no  definite  location,  where  cotton 
can  be  sold,  where  seller  and  buyer  can  meet,  what 
would  be  the  result?  Mr.  Smith  would  evidently 
leave  very  much  angered,  resolving,  no  doubt,  never 
to  bring  another  bale  of  cotton  to  Smithville,  deter- 
mining to  sell  his  cotton  in  future  at  other  points,  but 
should  he  go  to  any  other  place  and  find  the  same 
thing  to  obtain  as  confronted  him  at  Smithville,  then 
he  could  and  would  recognize  at  once  the  necessity 
of  a  place  where  he,  and  all  growers  of  cotton,  could 
meet  with  buyers,  for  the  definite  purpose  of  negotiat- 
ing cotton  sales. 

Were  it  possible  that  such  a  condition  could  exist, 
the  results  would  be  more  far-reaching  in  their  actions 
on  _  the  business  interests  of  a  country,  than  the  con- 
fusion reflecting  on  the  individual — in  the  one,  his 
own  interests  are  jeopardized,  while  that  of  the  other 
is  broad  and  sweeping,  affecting  the  public  in  its  en- 
tirety. 

The  character  and  description  of  such  places  of 
business,  while  to  a  large  extent  perform  the  functions 
of  an  exchange,  are  quite  different  from  the  New 
York  or  New  Orleans  Cotton  Exchanges — the  only 
two  leading  Exchanges  dealing  in  futures  in  America. 

On  this  local  market  place  for  the  sale  of  cotton 
anywhere  in  the  South,  the  vendor  can  offer  directly 
his  own  productions  for  sale,  or  assign  his  interests 
to  any  one  he  may  choose  to  act  as  agent  or  representa- 


66  The  American  Cotton  System 

tive  for  him;  any  one  desiring  who  may  be  able  to 
command  the  means  or  credit,  can  enter  such  a  place 
of  business  as  a  dealer  in  cotton,  exercising  his  own 
judgment  and  business  sagacity  to  guide  him  in  his 
efforts  to  establish  a  lucrative  business,  provided,  in 
some  instances  he  conforms  to  the  legal  requirements 
exacted  by  some  of  the  States,  a^  the  payment  of  a 
special  or  occupation  tax,  etc.  Barring  this  form  of 
minor  restriction,  any  one  competent  to  classify  and 
''figure''  cotton  can  seek  such  business  for  himself, 
cognizant  of  the  fact  that  he  is  not  subjected  to  any 
rules  or  regulations  further  than  that  of  propriety, 
business  acumen,  and  integrity  of  purpose  when  guid- 
ed by  honest  intentions  and  moral  ideas.* 

Origin  of  Exclvanges. — It  would  seem  from  a  care- 
ful perusal  of  the  foregoing  that  the  primitive  form 
of  marketing  cotton  described  should  have  been  in- 
strumental in  creating  a  tendency  to  the  establishment 
of  the  founda,tion  of  a  system  of  marketing  cotton 
as  that  carried  out  today  through  the  medium  of  the 
great  Exchanges,  but  from  the  evidence  adduced  from 
members  of  the  Exchanges,  from  its  records  and  other 
sources,  that  the  origin  of  the  Exchanges  came  from 
deals  embodying  features  known  as  ''futures'' —  con- 
tracts calling  for  delivery  of  cotton  at  some  future 
time  designated. 

History. — **Future  trading  in  cotton,  in  the  modern  ac- 
ceptance of  the  term,  is  of  comparatively  recent  origin. 
Up  to  about  forty-five  years  ago  future  sales  of  cotton  were 


♦This  is  certainly  an  evidence  of  the  necessity  of  some 
form  of  exchange  for  legitimate  trade. 

**From  report  of  the  Commission  of  Corporations  on 
Cotton  Exchanges,  Part  I,  pp.  39,  40,  55  and  56,  but  had  to 
be   bought   outright   as   a   speculation. 


O  Of  THE       ^ 


Exchanges  67 


virtually  unknown.  There  were  practically  no  short  sales 
— that  is,  merchants  at  this  date  would  not  contract  at  a 
time  when  they  had  no  cotton  on  hand  to  supply  a  spinner 
with  his  requirements  at  some  future  date  and  run  the 
risk  of  not  being  able  to  secure  the  cotton  in  the  meantime. 
Instead,  spinners,  both  in  this  country  and  abroad,  usually 
accumulated  large  stocks  of  actual  cotton  for  their  future 
needs.  Indeed,  at  this  time  an  extensive  system  of  for- 
ward or  future  contracts  was  almost  impossible,  owing  to 
the  lack  of  adequate  means  of  communication.  The  first 
successful  Atlantic  cable  had  not  been  laid  and  the  tele- 
graph was  still  in  its  infancy,  while  the  telephone  had  not 
been  invented.  It  is  true  that  future  transactions  in  cot- 
ton were  made  during  the  Civil  War,  but  it  appears  that 
the  price  at  which  the  cotton  was  secured  was  considered 
of  less  importance  than  the  certainty  of  getting  the  cotton 
at  all,  and  there  was  nothing  like  what  could  be  called  a 
future  system  at  that  time. 

There  can  be  ho  doubt  that  the  extremely  unsettled  con- 
ditions which  prevailed  just  after  the  close  of  the  Civil 
War  had  much  to  do  with  the  development  of  the  future 
system.  With  many  plantations  in  the  South  ruined,  the 
cotton  crops  of  that  period  were  comparatively  sniall.  The 
average  crop  in  the  United  States  for  the  three  years  ended 
in  1S61  was  over  4,400,000  bales,  whereas  for  the  four 
ended  in  1869  the  average  was  only  about  2,500,000  bales. 
Prices  ,in  the  latter  period  were  extremely  high,  and  owing 
to  the  unsettled  state  of  affairs,  and  particularly  of  the 
currency,  ffuctuations  were  violent.  The  spinner  who 
was  about  to  contract  ahead  for  the  sale  of  his  cotton 
goods  was  unwilling  to  depend  upon  day  to  day  purchase 
of  cotton  at  widely  varying  prices,  and  yet  was  unable  to 
buy  his  entire  wants  at  once  in  the  spot  market.  On  the 
other  hand,  the  cotton  merchant  was  anxious  to  dispose  of 
his  stock  when  prices  touched  a  high  level  and  to  sell  an 
additional  quantity  at  such  high  levels  for  more  distant 
deliveries,  relying  upon  his  ability  to  secure  the  cotton 
in  the  meantime  at  lower  prices.  The  two  parties  in  the 
market  were  therefore  both  ready  for  some  system  by 
which  they  could  go  beyond  the  narrow  limits  of  the  mo- 
ment. Both  were,  in  other  words,  ready  for  organized 
future  trading.  The  introduction  of  the  future  system  was 
undoubtedly  hastened  by  the  remarkable  improvement  in 
means  of  communication  and  transportation  which  oc- 
curred just  at  this  period,  particularly  by  the  extension  of 
telegraphic  service  and  the  successful  operation  of  the 
trans-Atlantic  cable.  A  manufacturer  in  Fall  River  or 
Liverpool  who  was  offered  a  long  term  contract  for  the 
delivery  of  cotton   cloth,   and   who   formerly   might   have 


68  The  American  Cotton  System 

declined  it  unless  he  was  fortunate  enough  to  be  carrying 
a  large  supply  of  cotton,  was  now  in  position,  by  utiliz- 
ing the  future  system,  to  contract  for  his  requirements  of 
raw  material  on  short  notice.  The  willingness  of  sellers 
to  enter  into  such  contracts  was  increased  by  the  same 
causes,  and  furthermore  by  the  fact,  explained  in  the  next 
section,  that  the  risk  of  such  operations  was  greatly  re- 
duced by  the  very  nature  of  the  future  system  itself. 

A  further  important  fact  was  that  the  new  system 
greatly  facilitated  speculation.  Hitherto  speculation  in 
cotton  had  been  mainly  on  the  buying  side,  and  was  in  the^ 
form  of  an  accumulation  of  a  stock  in  anticipation  of  an 
advance  in  the  price.  The  future  system,  through  the  op- 
portunity which  it  afforded  for  forward  or  short  sales, 
enabled  speculators  with  an  equal  facility  to  sell  cotton  at 
a  time  when  they  did  not  actually  possess  it,  in  anticipa- 
tion of  an  expected  decline. 

Under  these  conditions  the  development  of  the  system, 
as  just  stated,  progressed  rapidly.  By  1868  future  sales 
had  become  a  distinct  feature  of  the  cotton  business. 

About  this  time  dealings  in  future  contracts  were  regu- 
larly reported  in  the  leading  trade  journals.  With  this 
rapid  development  of  the  business  came  the  organization 
of  cotton  exchanges. 

4e  «  4c  4i  *  *  *  * 

The  advantages  of  the  future  system  were  so  apparent 
that  dealings  in  future  contracts  increased  with  great 
rapidity.     During  the  period  from  January  1  to  August  31, 

1869,  the  total  sales  of  such  contracts  in  the  New  York 
market  amounted  to  101,665  bales  as  compared  with 
873,563  bales  of  spot  transactions.  A  "spot"  transaction  is 
one  made  from  goods  on  hand,  and  which  calls  for  prac- 
tice 11  v  immediate  delivery. 

iL  tht  nexL  crop  year,  during  which  the  exchange  was 
organized  and  a  regular  form  of  contract  adopted,  dealing 
in  these  forward  deliveries  aggregated  591,586  bales,  as 
compared  with  616,410  bales  of  spots.  In  the  year  ended 
August  31,  1871,  there  was  an  enormous  increase  in  the 
volume  of  future  trading,  which  reached  a  total  of  nearly 
3,000,000  bales,  as  compared  with  733,905  bales  of  spots. 

This  remarkable  increase  in  the  volume  of  business 
created  a  necessity  for  the  establishment  of  rules  and  regu- 
lations for  its  systematic  conduct  ,and  this  in  time  led  to 
the  organization  of  cotton  exchanges. 

The  New  York  Cotton  Exchange,  the  first  of  these  insti- 
tutions   in   this    country   was   organized    on    September   7, 

1870,  as  a  voluntary  association;  in  April,  1871,  it  was  in- 
corporated  under  the  laws   of  New  York.     Shortly  after- 


Exchanges  69 

wards  cotton  exchanges  were  organized  in  various  South- 
ern cities.  The  New  Orleans  Cotton  Exchange  was  forpaed 
in  January,  1871;  the  Mobile  Cotton  Exchange  in  Decem- 
ber of  that  year;  the  Galveston  Cotton  Exchange  and 
Board  of  Trade,  the  Savannah  Cotton  Exchange,  and  the 
Charleston  Cotton  Exchange  in  1872,  and  the  Memphis  Cot- 
ton Exchange  in  1874.  Among  other  cotton  exchanges 
may  be  mentioned  the  Houston  Cotton  Exchange  and  Board 
of  Trade,  the  Vicksburg  Cotton  Exchange,  the  St.  Louis 
Cotton  Exchange,  the  Augusta  Exchange  and  Board  of 
Trade,  the  Norfolk  and  Portsmouth  Cotton  Exchange,  the 
Little  Rock  Board  of  Trade,  and  the  Shreveport  Cotton 
Exchange. 

Further  elucidating  this  history,  \\^e  again  quote 
from  the  same  authority. 

Before  the  Civil  War  the  cotton  business  in  New  York 
was  simply  one  form  of  old-fashioned  commission  business, 
exactly  like  the  business  of  handling  molasses,  sugar,  hides, 
wool,  country  produce,  and  many  other  similar  agricultural 
commodities. 

The  Civil  War  completely  upset  the  regular  conduct  of 
the  cotton  business  in  New  York,  as  just  described.  While 
it  lasted  there  were,  of  course,  no  regular  shipments  of 
cotton  to  New  York  from  the  South,  and  the  only  source  of 
supply  consisted  of  lots  of  cotton  which  the  Government 
from  time  to  time  got  hold  of  through  capture  of  blockade 
runners,  or  through  confiscation  in  the  South.  Naturally 
such  lots  of  cotton  could  not  be  handled  on  a  commission 
basis. 

The  huge  profit  made  by  some  of  those  who  bought  this 
Government  cotton  was  the  real  beginning  of  general  specu- 
lation in  cotton  in  this  country.  And  the  same  thing 
happened  across  the  water,  in  Liverpool.  The  fierce  de- 
mand and  the  uncertain  and  inadequate  supply  gave  op- 
portunity for  vast  and  sudden  profits,  such  as  has  never 
been  seen  before  or  since  in  connection  with  any  com- 
modity. And,  curiously  enough,  it  was  out  of  this  wild 
speculation  of  the  time  of  the  Civil  War  that  the  entire 
modern  method  of  handling  the  cotton  business  was 
evolved,  for,  in  their  eagerness  to  get  hold  of  cotton,  specu- 
lators began  to  buy  not  only  actual  cotton  on  the  spot  in 
New  York  or  Liverpool,  but  "cotton  to  arrive,"  when  they 
got  wind  of  a  lot  of  cotton  on  some  ship  destined  for  one 
or  the  other  of  those  ports.  Here  was  the  beginning  of 
the  system  of  trading  in  cotton  futures,  which  has  gradu- 
ally revolutionized  the  whole  cotton  business  in  every  root 


70  The  American  Cotton  System 

and  branch,  for  certain  very  clever  men,  whose  business 
was  that  of  cotton  merchants  and  not  speculators,  saw  a 
way  to  make  use  of  the  extensive  trading  in  contracts  for 
"cotton  to  arrive"  as  a  protection  to  themselves  in  their 
legitimate  buying  and  selling  of  actual  cotton. 

It  was  two  or  three  years  after  the  Civil  War  that  this 
new  conception  of  the  cotton  business  took  shape  in  the 
mind  of  one  of  the  most  brilliant  cotton  merchants  the 
world  has  ever  known,  the  late  Mr.  John  Rew,  of  Liverpool, 
whose  firm  is  still  in  existence.  In  1868  or  1869  Mr.  Rew 
saw  that  the  newly  laid  Atlantic  cable  made  it  possible  for 
a  cotton  merchant  in  Liverpool  to  ascertain  with  unheard- 
of  quickness  the  price  at  which  actual  cotton  could  be 
bought  in  the  Southern  States. and  the  approximate  date 
at  which  it  could  be  shipped  to  England.  He  saw  also  that 
the  price  that  was  being  bid  in  Liverpool  for  "cotton  to 
arrive"  was  high  enough  to  enable  him  to  buy  the  cotton 
in  the  South  and  sell  contracts  for  this  same  "cotton  to 
arrive"  in  Liverpool  two  or  three  months  later,  he  could 
enter  into  the  transaction  with  entire  safety,  as  when  his 
cotton  reached  Liverpool  he  could  either  deliver  it  to  the 
parties  to  whom  he  had  sold  the  contract,  or  if  some 
spinner  was  willing  to  pay  a  higher  relative  price  than 
the  holder  of  the  contracts  had  agreed  to  pay,  he  could 
buy  back  his  contracts  and  sell  the  cotton  to  the  spinner 
with  the  large  profit  to  himself. 

The  immediate  and  large  success  obtained  by  Mr.  Rew 
in  his  new  way  of  conducting  the  cotton  business  attracted 
the  instant  attention  of  the  ablest  cotton  merchants  both 
of  Liverpool  and  New  York;  and  when  a  year  or  two  later 
(in  1870  and  1871,  respectively),  the  Liverpool  Cotton 
Association  and  the  New  York  Cotton  Exchange  were  or- 
ganized "the  best  men  in  the  trade  had  the  new  scheme  as 
the  J)asis  of  their  business.  Already  before  the  organiza- 
tion of  these  great  exchanges  the  methods  of  dealing  in 
contracts  for  "cotton  to  arrive"  or  "for  future  delivery" 
had  become  fairly  well  systematized.  For  example,  the 
contract  unit  had  already  been  made  100  bales  as  generally 
put  up  in  the  South.  The  period  under  which  delivery 
might  be  made  under  the  contract  had  been  fixd  at  two 
months  in  Liverpool  and  one  month  in  New  York,  the 
reason  for  this  difference  being  that  in  those  days  the  du- 
ration of  an  ocean  voyage  to  Liverpool  was  necessarily 
uncertain,  and  it  was  considered  fair  that  a  delivery  of 
cotton  out  of  a  vessel  arriving  at  any  time  during  two 
coupled  months  should  be  a  good  delivery.  Hence  we  have 
to  this  day  all  the  trading  done  in  coupled  months,  that  is, 
May-June,  July-August,  January-February,  etc.     In  New 


Exchanges  71 

York,  on  the  other  hand,  it  was  felt  that  the  arrival  of 
cotton  could  be  calculated  in  a  single  month,  and  so  con- 
tracts for  future  delivery  covered  only  one  month,  January, 
March,  July,  etc.  These  details  and  many  others  were 
embodied  in  the  by-laws  and  rules  of  the  L/iverpool  and 
New  York  Exchanges,  and  other  by-laws  and  rules  were 
adopted  to  produce  absolute  uniformity,  equality  and  fair- 
ness in  all  trading;  whether  between  members  of  the  ex- 
changes themselves,  or  betwen  members  and  the  public 
at  large.  Here,  then,  at  least  the  cotton  merchants  who 
had  seized  upon  Mr.  John  Rew's  new  method  of  conduct- 
ing the  cotton  business  had  all  the  facilities  they  required." 
*An  excerpt  from  an  address  by  Mr.  Arthur  R.  Marsh,  a 
member  of  the  New  York  Exchange,  before  the  National 
Association  of  Cotton  Manufacturers  at  Washington,  D.  C, 
on  October  4,  1907. 

It  will  be  recalled,  in  a  previous  portion  of  this 
work  a  pen-picture,  illustrating  the  manner  by  which 
the  cotton  of  the  South  makes  its  initial  appearance 
on  the  streets,  squares,  etc.,  in  the  villages  and  towns, 
setting  forth  the  same  as  legitimate  places  fulfilling 
the  functions  of  an  exchange.* 

To  better  carry  on  this  character  of  business  on  a 
broader  and  higher  financial  plane,  came  the  forma- 
tion of  the  organized  cotton  exchanges  of  the  country, 
their  inception  originating  from  the  causes  enumerated 
in  the  preceding. 

The  contemplated  purpose  for  the  establishing  of 
these  exchanges  primarily,  and,  no  doubt,  ultimately, 
was  conceived  to  be  intentional  in  executing  purely 
legitimate  transactions,  and  none  other,  and  in  its 
declaration  of  purposes,  the  New  Orleans  Cotton  Ex- 
change states  in  its  Constitution  and  By-Laws: 

**The  purposes  of  this  Association  shall  be  to  pro- 


*Prom  report  of  the  Commission  of  Corporations  on  Cot- 
ton Exchanges,  Part  I,  pp.  39,  40,  55  and  56. 

*See  page  63. 


72  The  American  Cotton  System 

vide  and  maintain  suitable  rooms  for  a  Cotton  and 
Commercial  Exchange  in  the  city  of  New  Orleans,  to 
adjust  controversies  between  its  members,  to  estab- 
lish just  and  equitable .  principles,  uniform  usages, 
rules  and  regulations  and  standards  for  classifications, 
which  shall  govern  all  transactions  connected  with  the 
cotton  trade  or  any  other  articles  of  trade  between  its 
members;  to  acquire,  preserve  and  disseminate  infor- 
mation connected  therewith;  to  decrease  the  risk  inci- 
dent thereto  and  to  generally  promote  the  interests 
of  the  trade,  and  increase  the  facilities  and  amount 
of  the  cotton  and  other  business  in  the  city  of  New 
Orleans. '  '* 

The  declaration  of  purposes  of  the  New  York  Cot- 
ton Exchange  are  so  nearly  similar  as  to  require  no 
insertion  here,  and  the  statements  of  those  of  New 
Orleans  are  fully  explanatory  for  both. 

In  the  execution  of  trades  through  members  of  the 
exchanges  the  largest  percentage  of  its  volume  is  di- 
rected to  that  line  of  business  known  as  ^^ futures/'  or 
deals  in  contracts,  the  nature  of  which  embody  feat- 
ures calling  for  delivery  of  cotton  at  a  future  date. 

It  is  claimed  by  its  members  that  the  introduction 
and  continuation  of  such  a  character  of  business  has 
given  to  the  trade  a  well  regulated  system  of  hand- 
ling cotton,  especially,  for  future  delivery;  has  es- 
tablished grades  or  classes  of  cotton  with  definite 
recognized  values;  has  been  instrumental  in  facilitat- 
ing transactions  between  producer  and  consumer ;  has 
practically  done  away  with  the  old  style  of  consign- 
ing cotton  to  commission  merchants  to  be  sold  by  them 


*Article  2,  Const,  and  By-Laws,  N.  O.  Cotton  Exchange. 


Exchanges  73 

for  account  of  others;  has  given  greater  latitude  to 
the  markets  of  the  world  by  bringing  into  closer  rela- 
tionship with  the  great  cotton  interests;  has  virtually 
narrowed  the  range  of  prices  and  prevented  violent 
fluctuations,  and  in  this  line  tended  its  good  offices 
as  an  auxiliary  in  regulating  prices  at  home,  which 
being  reflective  on  the  foreign  markets  conduce  to 
regulation  there,  and  facilitates  the  operation  of  bas- 
ing prices  on  supply  and  demand. 

These  claims  are  ideal  and  fulfill  the  requisites  es- 
sential to  Cotton  Exchange  pre-eminently. 

An  analysis  of  the  character  of  the  business  actu- 
ally transpiring  daily  within  its  walls  would  seem  to 
indicate  that  a  wide  departure  from  the  legitimate 
course  of  the  requirements  of  such  an  institution  has 
taken  place  many  times. 

The  basis  of  its  operations  being  founded  on  the 
contracts  emanating  from  it,  the  forms  prescribed  for 
instruments  of  this  kind  are  here  inserted. 


74  The  American  Cotton  System 

The  New  York  Cotton  Exchange  Contract  reads: 
NEW   YORK   COTTON   EXCHANGE. 
Contract. 
New   York, 19 

In  consideration  of  one  dollar  in  hand  paid,  receipt  of 

•  which  is  hereby  acknowledged 

have  this  day  Sold  to  (or  Bought 

from)  50,000  lbs.  in  about  100  square  bales  of  cotton, 
growth  of  the  United  States,  deliverable  from  licensed 
warehouse,  in  the  port  of  New  York,  between  ^the  first 

and  last  days  of next,  inclusive.     The 

delivery  within  such  a  time  to  be  at  seller's  option  in  one 
warehouse,  upon  notice  to  buyer,  as  provided  by  the  By- 
Laws  and  Rules  of  the  New  York  Cotton  Exchange.  The 
cotton  to  be  of  any  grade  from  Good  Ordinary  to  Fair, 
inclusive,  and  if  Tinged  or  Stained,  not  below  Low  Mid- 
dling   Stained    (New    York    Cotton    Exchange   inspection 

and  classification),  at  the  price  of cents  per 

pound  for  Middling,  with  additions  or  deductions  from 
other  grades,  according  to  the  rates  of  the  New  York 
Cotton  Exchange  existing  on  the  day  previous  to  the 
date   of  the   transferable   notice   of   delivery. 

Either  party  to  have  the  right  to  call  for  a  margin,  as 
the  variation  of  the  market  for  like  deliveries  may  war- 
rant, and  which  margin  shall  be  kept  good.  This  contract 
is  made  in  view  of,  and  in  all  respects  subject  to  the 
rules  and  conditions  established  by  the  New  York  Cot- 
ton Exchange,  and  in  full  accordance  with  Section  92  of 
the  By-Laws. 

A  portion  of  this  contract  form  was  amended  and 
became  operative  in  April,  1908 ;  it  reads : 

The  cotton  to  be  of  any  grade  from  Good  Ordinary  to 
Fair,  inclusive,  and  if  tinged,  not  below  Low  Middling 
tinged,  or  if  stained,  not  below  Middling  stained  (New 
York  Cotton  Exchange  inspection  and  classification),  at 
the  price  of,  etc.,  etc. 


Exchanges  75 

The  following  form  shows  the  New  Orleans  Cotton 
Exchange  contract. 

Contract. 
New  Orleans 19 

In   consideration   of  one   dollar  in   hand   paid,   receipt 

of  which  is  hereby  acknowledged 

have  this  day  sold  to   (or  bought  from) 

50,000  pounds  in  about  100 

square  bales  of  cotton,  growth  of  the  United  States,  de- 
liverable from  press  or  presses,  railroad  depot  or  depots, 
in  the  port  of  New  Orleans,  between  the  first  and  last 
days  of next,  inclusive. 

The  delivery  within  such  time  to  be  at  seller's  option, 
in  not  more  than  two  places,  upon  five  days'  notice  to 
the  buyer. 

The  cotton  to  be  of  any  grade  from  Good  Ordinary 
(fair  color)  to  Fair,  inclusive,  and  if  stained,  not  below 

Low  Middling,  at  the  price  of cents 

( )   per  pound  for  Middling,  with  additions  or 

deductions  for  other  grades,  according  to  the  quotations 
of  the  New  Orleans  Cotton  Exchange  existing  on  the 
sixth  (6th)  day  previous  to  the  day  on  which  delivery 
is  due. 

It  is  distinctly  understood  and  agreed  that  no  cotton 
shall  be  tendered  or  received  under  this  Contract  of  a 
less  market  value  than  Good  Ordinary  (fair  color),  and 
that  the  receiver  shall  have  the  right  to  refuse  all  sandy, 
dusty  red  or  gin  cut  cotton;  dusty  cotton  being  defined 
under  this  Contract  as  cotton  lessened  in  value  more 
than  l-8c  per  pound  by  reason  of  dust;  sandy  cotton  be- 
ing defined  under  this  contract  as  cotton  containing  more 
than  1  per  cent  of  sand. 

Either  party  shall  have  the  right  to  call  for  margin, 
at  the  variations  of  the  market  for  like  deliveries  may 
warrant,  and  which  margin  shall  be  kept  good. 

This  contract  is  made  in  view  of,  and  in  all  respects 
subject  to,  the  rules  and  conditions  established  by  the 
New  Orleans  Cotton  Exchange,  and  in  full  accordance 
with  Rule  25  of  said  New  Orleans  Cotton  Exchange. 

For  the  purposes  of  this  Contract,  Westwego  and 
Southport  are  not  included  as  places  of  delivery. 

Signed   


76  The  American  Cotton  System  ' 

Orders  given  to  members  of  the  New  Orleans  Cot- 
ton Exchange  to  buy  or  sell  a  contract  for  future  de- 
livery of  cotton,  as  an  agent  or  broker  for  the  party 
giving  the  order,  are  required  to  receive  the  same  on 
the  following  form : 

"Subject  to  the  Rules  and  By-Laws  of  the  New  Orleans 
Cotton  Exchange,  make  for  my  account,  and  as  often 
canceled  replace  a  contract  for  the  sale  (or  purchase) 
of  one  hundred  bales  of  cotton  deliverable  (or  re- 
ceivable)  in  July." 

ANALYSIS   OF    THE    COTTON   EXCHANGE   BUSINESS. 

On  the  previous  page  of  this  work,  mention,  and 
a  minute  description  of  a  day's  business  on  the  New 
Orleans  Cotton  Exchange  is  given.*  To  acquaint  the 
reader  with  the  particulars  concerning  the  character 
of  the  transactions  taking  place  daily  in  the  great 
exchanges,  it  is  necessary  to  particularize  to  some  ex- 
tent. The  author  believes  it  is  very  essential  that 
producers  should  be  enlightened,  as  well  as  dealers, 
concerning  the  cotton  business  from  beginning  to  end, 
and  armed  with  such  knowledge,  the  intelligent  pro- 
ducer should  be  in  position  to  meet  any  dealer  or 
consumer  in  the  execution  of  any  trade  to  be  con- 
summated, upon  equal  grounds. 

The  prices  of  futures  and  spots  emanating  from  the 
Cotton  Exchanges,  being  wired  to  all  commercial  cen- 
ters, affords  a  basis  on  which  the  producer's  cotton 
is  sold,  and  here  seems  to  be  the  point  of  conten- 
tion between  the  Exchange  and  the  grower,  who  al- 
leges the  Exchange  prices  are  many  times  fictitious, 
and  the  unsophisticated  cotton  grower  should  not  be 

♦Page  79. 


Exchanges  77 

subjected  to  the  alternative  of  accepting  spurious  quo- 
tations as  a  reward  for  his  industry,  or  not  make  a 
sale. 

The  present  system  of  marketing  cotton,  whose 
parentage  rests  with  the  New  York  and  New  Orleans 
Cotton  Exchanges,  is  a  system  over  which  some  com- 
mercial interests  and  the  cotton  agricultural  elements 
of  the  South  are  at  variance,  the  former  contending 
for  a  perpetuity  of  the  system;  the  other  seeking 
its  destruction;  the  one  contending  for  the  mastery, 
the  other  fighting  a  believed-to-be  subordination. 

The  cotton  grower  does  not  alienate  himself  against 
the  members  of  any  exchange  whose  deals  involve  the 
handling  of  spot  cotton,  nor  against  the  member  who 
contracts  in  good  faith  to  deliver  when  sold,  or  to  re- 
ceive when  bought,  any  number  of  bales  of  cotton,  but 
does  feel  that  his  interests  are  jeopardized  when  con- 
tracts for  cotton  are  so  manipulated  as  to  give  ficti- 
tious prices  to  his  products  on  purely  gambling  trans- 
actions. 

Contracts  are  dealt  in,  similarly,  as  one  would 
handle  stocks,  bonds,  notes  or  mortgages,  etc.,  with 
the  exception,  that  cotton  contracts  bought  or  sold 
through  the  cotton  exchanges  are  often  settled  for, 
by  the  contracting  parties  paying  a  margin  to  settle 
the  contract. 

The  contract  calls  for  100  bales  or  more;  the  New 
York  and  New  Orleans  Cotton  Exchanges  will  not  con- 
tract to  sell  or  buy  less  than  that  quantity. 

If  a  cotton  merchant  buys,  say,  100  B/C — a  con- 
tract for  100  bales — through  some  member  of  the  New 
Orleans  Cotton  Exchange,  or  his  representative,  at, 
say,  10  cents  a  pound,  he  can  pay  a  margin  of  $1.00  a 


78  The  American  Cotton  System 

bale — 100  dollars  for  100-bale  contract — and  should 
the  market  advance  20  points,  the  price  would  then 
be  10.20  cents  a  pound,  the  merchant  can  close  the 
deal  by  calling  for  this  20-point  advance,  equal  to 
him  to  100  dollars.  If  the  contract  is  closed  on  this 
advance,  the  merchant  has  received  100  dollars,  as 
a  marginal  profit,  less  $15.00.* 

Should  the  market  decline  20  points,  equivalent  to 
one  dollar  on  each  500-pound  bale  (the  weight  recog- 
nized by  the  exchanges  in  contracts  as  a  commercial 
bale),  the  merchant  has  a  loss  of  100  dollars,  and  the 
price  of  his  contract  stands  now  to  9.80  cents  a  pound; 
should  the  merchant  refuse  to  pay  20  points  more 
(100  dollars),  his  contract  is  canceled  and  the  broker 
keeps  the  original  100  dollars  paid  him  by  the  mer- 
chant. 

In  such  transactions  the  purchaser  gains  on  ad- 
vances in  prices  in  the  market,  and  the  seller  loses; 
inversely,  declines  in  prices  cause  the  purchaser  a 
loss,  and  the  seller,  a  gain. 

Continuing  the  illustration,  when  the  decline  had 
gone  to  20  points,  the  merchant  had  a  loss  in  his  con- 


♦Commission  $7.50  to  buy,  $7.50  to  sell — $15.00  for 
both.  If  the  credit  rating  of  the  purchaser  is  not  good, 
or  is  unknown,  a  broker  will  usually  sell  out  the  con- 
tract on  17  points  decline,  in  order  to  protect  himself, 
and  to  secure  a  brokerage  of  3  points;  that  is,  20  points 
will  cover  a  margin  of  17  points  and  a  3  point  brokerage. 
If  the  purchaser's  account  is  beyond  question,  the  broker 
may  carry  the  cotton  beyond  a  20-point  decline  as  an 
accommodation  to  his  customer. 


Exchanges  79 

tract  of  100  dollars,  which  he  could  surrender  or  pro- 
tect by  paying  the  broker  100  dollars  more.  Should  the 
merchant  think  he  had  evidence  to  influence  him  to 
believe  a  reaction  was  due  or  would  soon  occur,  and 
pay  the  additional  100  dollars  called  for,  his  contract 
would  now  cost  him  200  dollars,  that  is,  the  broker 
would  have  200  dollars  of  his  money,  and  the  mer- 
chant a  contract  for  100  bales  of  cotton;  were  the 
market  to  decline  to  9.60,  the  merchant  would  bp 
called  upon  again  to  put  up  another  100  dollars,  he 
could  do  so  and  protect  his  purchase,  or  refusing,  his 
contract  would  be  canceled  at  a  loss  now  to  him,  of 
200  dollars.  The  contract  price  standing  at  9.80,  the 
market  would  have  to  advance  to  10.40  to  give  the 
merchant  a  return  of  his  200  dollars,  less  15  dollars. 

In  this  character  of  business,  wher^  both  buyer  and 
seller  deal  in  contracts  with  the  view  of  making  or 
losing  on  the  deal;  where  settlements  are  made  by 
paying  one  to  the  other  a  loss  or  gain  according  as 
the  market  turns  for  or  against  them;  where  losses 
and  gains  are  paid  by  settling  for  the  differences  in 
the  value  of  the  contracts,  and  are  dealt  in  with  no 
idea  of  delivering  or  receiving  the  cotton  contracted 
for ;  where  gains  are  to  be  had  on  advances  and  losses 
on  declines,  or  vice  versa,  evidently  bears  all  the  feat- 
ures of  purely  gambling  transactions  and  are  cer- 
tainly reprehensible  in  the  extreme.  Such  contracts 
are  optional,  or  ^^ options/' 

It  has  been  stated  by  some  opposing  exchange  op- 
erations, but  the  author  does  not  give  this  as  official, 
that  fully  65  per  cent  of  the  volume  of  business  done 
in  contracts  through  the  members  of  the  exchanges, 


80  The  American  Cotton  System 

consists  of  that  form  requiring  no  delivery  nor  re- 
ceipt of  cotton  on  them. 

Reasoning  from  analogy,  one  would  conclude  that 
65  per  cent  of  cotton  exchange  business  is  illigitimate, 
and  35  per  cent  conducive  to  beneficial  results. 

If  such  surmising  is  correct,  the  great  cotton  ex- 
changes of  our  country  are  institutions  in  which  the 
largest  per  cent  of  its  business  is  gambling  pure  and 
simple,  and  to  this  feature,  the  attention  of  our  state 
and  national  legislatures  has  been  called  with  a  view 
of  having  them  enact  laws  eliminating  such  censurable 
practices.* 

BUCKET  SHOPS. 

For  convenience  of  those  who  wish  to  speculate  in 
the  rise  and  fall  of  prices  in  agricultural  products 
or  any  other  branch  of  industry,  whose  prices  were 
regularly  quoted  on  the  Exchanges  and  Boards  of 
Trade,  suitable  places  in  all  the  busy  marts  of  Amer- 
ica for  receiving  telegraphic  advices  respecting  mar- 
ket quotations,  were  established  sometime  after  the 
organization  of  the  large  Exchanges. 

The  class  of  business  executed  in  these  institutions, 
to  many,  was  similar  in  character  to  that  of  the  estab- 
lished Exchanges. 

Cotton  Exchanges  do  not  deal  in  less  than  100  bales 
of  cotton  on  contracts,  while  Bucket  Shops  will  take 
orders  for  25,  30,  50,  75,  100  or  more  bales,  and  in 
some  instances,  as  low  as  10  bales,  to  satisfy  which, 


*It  has  been  unofficially  stated  by  some  members  of 
the  exchanges  that  fully  90  per  cent  of  the  business 
transacted  by  these  institutions  is  legitimate. 


Exchanges  81 

the  prices  of  the  quoted  articles  from  the  Exchanges 
are  the  factors  determining  settlement. 

Trades  in  Bucket  Shops  are  not  based  either  directly 
or  indirectly  upon  actual  cotton,  as  saeh  character  of 
business  does  not  contemplate  either  the  receipt  or 
delivery  of  cotton  on  any  transaction  originatmg  there. 

In  establishing  such  places  of  business  it  was  not 
contemplated  the  convening  of  buyer  and  seller  for 
the  purpose  of  executing  contracts  with  intentions  of 
delivering  or  receiving  any  article  dealt  in,  but  in- 
stead, those  who  entered  these  places  for  buying  or 
selling  contracts,  handled  them  with  the  view  of  mak- 
ing or  losing,  as  the  prices  for  exchange  values  showed 
advances) or  declines;  that  is,  its  patrons  would  place 
their  money  on  a  Bucket  Shop  contract  as  a  dealer  at 
a  card  game  would  place  his  money  on  a  certain  card 
— taking  a  blind  chance  to  win  or  lose. 

The  Bucket  Shop  is  a  parasite  upon  the  legitimate 
Exchanges;  its  business  is  detrimental  and  reflective 
against  them;  it  is  not  contributive  to  the  establish- 
ment of  values,  but  may  injure  them  intrinsically; 
to  the  agriculturist  it  is  of  no  economic  value. 

Hazarding  money  upon  a  contract  of  the  Exchanges, 
with  the  idea  of  gaining  or  losing  by  making  such 
deals  exclusively  for  marginal  purposes,  is  practically 
the  same  in  kind  as  buying  through  any  Bucket  Shop. 

For  illustration,  let  it  be  understood  that  in  Johns- 
town are  two  places  on  opposite  sides  of  the  street, 
one,  a  place  where  representatives  of  the  legally  or- 
ganized Exchanges  are  receiving  regularly  the  quota- 
tions from  these  Exchanges;  the  representative  or 
representatives  being  duly  authorized  to  execute  con- 
tracts for  members  of  the  Exchanges,  do  so  in  the 

6 


82  The  American  Cotton  System 

regular  way,  making  no  contract  for  less  than  IOC 
bales.  Customers  entering  into  contract,  to  buy  oi 
sell  this  amount  of  cotton,  or  more,  with  intention 
purely,  of  making  money  by  the  rise  and  fall  oi 
prices,  eliminate  speculation  entirely  in  actual  cot- 
ton, and  the  investments  are  nothing  more  nor  less 
than  bets  in  any  other  thing  of  value. 

If  John  Adams  pays  to  the  local  broker  100  dollars 
for  100  bales  of,  say,  July  cotton,  and  John  stands 
in  the  lobby  of  this  representative  Exchange  and 
watches  anxiously  the  prices  for  the  different  months 
as  they  are  chalked  on  the  blackboard,  in  column  form 
every  few  minutes;  he  can  readily  witness  his  loss  or 
gain  as  the  figures  show  to  rise  above  or  fall  below  the 
price  at  which  he  bought;  if  the  purchase  price  is 
10  cents,  and  the  market  advances  10  points,  he  has 
a  profit  of  50  dollars;  if  20  points,  100  dollars — for 
every  point  advance  on  a  500-pound  bale  of  cotton, 
there  is  an  equivalent  value  of  5  cents  on  the  bale — 
and  as  both  parties  have  a  right  under  the  rules  of 
the  Exchange  to  call  for  a  margin,  in  this  instance 
John  can  call  for  a  settlement  of  the  contract  at 
any  time  he  may  desire,  *  whether  it  be  for  loss  or 
gain;  presuming  that  the  market  has  gone  up  20 
points  and  John  has  made  100  dollars  (less  the  com- 
mission of  15  dollars),  he,  feeling  that  he  has  done 
well,  and  no  doubt  giving  himself  credit  for  exhibit- 
ing marked  financial  ability,  thinks  he  can  do  so  again, 
he  quits  this  place  of  business,  steps  across  the  street 
into  a  Bucket  Shop  and  again  buys  100  bales  of  future 
cotton,  but  as  he  sold  his  first  contract  on  a  20-point 
advance  in  the  market,  he  now  buys  at  the  figure  for 
which  he  sold,  or  perhaps,  a  little  more,  as  the  market 


Exchanges  83 

has  advanced,  a  bullish  feeling  pervades  the  entire 
trading  fraternity  and  John  feels  equally  sure  of 
making  a  gain  here,  but  as  the  prices  are  being  placed 
on  the  board — prices  coming  from  some  of  the  organ- 
ized Exchanges — he  witnesses  the  beginning  of  a  de- 
cline, and  as  the  declines  slightly  stop  at  times,  or  per- 
haps again  advance  a  few  points  to  be  followed  in 
turn  by  further  declines,  this  alternating,  stimulates 
him,  mixed  with  hope  and  doubt,  to  hang  on  to  his 
purchase,  but  the  inevitable  happens ;  the  market  grad- 
ually declines  to  20  points  below  his  purchase  price, 
when  he  is  called  upon  to  put  up  another  hundred 
dollars,  which  he  refusing  to  do,  loses  the  100  dol- 
lars as  first  purchase  price. 

Note  this:  When  John  made  100  dollars  through 
a  deal  with  a  representative  of  the  Exchange,  he  paid 
this  representative  15  dollars  commission,  also,  paid 
the  same  amount  for  a  bucket  shop  contract,  and  not 
only  lost  100  dollars,  but  15  dollars  commission  in 
excess  of  the  hundred  dollars. 

It  might  appear  that  he  won  100  dollars  in  the  first 
instance,  lost  the  same  amount  in  the  second,  and  of 
the  two  deals,  one  exactly  offset  the  other,  with  no  loss 
to  him.  As  a  fact,  the  100  dollars  gained,  did  exactly 
offset  the  hundred  dollars  lost,  but  the  cost  to  secure 
these  two  contracts  was  15  dollars  for  each,  and  the 
net  loss  to  John,  finally,  was  30  dollars. 

The  character  of  the  two  deals  made  by  John  is 
identical  in  both  instances;  his  deals  were  made  with 
his  personal  knowledge  of  the  fact  that  if  the  market 
advanced  he  would  gain,  if  it  declined  he  would  lose ; 
they  were  made  in  both  institutions  with  no  intention, 
whatever,  of  delivering  any  cotton  to  any  one  on  them, 


84  The  American  Cotton  System    , 

and  were  literally  gambling  bets,  nothing  more,  noth- 
ing less. 

Thousands  and  tens  of  thousands  of  Johns  have 
been  allured  into  such  business  for  many  years ;  those 
who  were  fortunate  enough  to  succeed  in  winning 
handsome  sums,  were  lauded  as  sagacious  financiers, 
while  the  unlucky  Johns,  with  the  influential  sym- 
pathizers enlisting  in  their  behalf,  caused  so  strong  a 
sentiment  to  arise  against  this  kind  of  business,  which 
finally  gathering  strength  as  it  progressed  until  its 
voice  could  be  heard  in  the  halls  of  the  State  Legis- 
latures and  National  Congress,  and  to  help  the  un- 
fortunate Johns,  laws  have  been  enacted  in  most  of 
the  Southern  States  preventing  his  patronizing  Bucket 
Shops;  outlawing  Bucket  Shops,  and,  that  he  might 
not  *^ waste  his  store''  in  any  form  of  gambling,  laws 
that  shall  fall  as  a  protective  mantle  over  him  have 
gone  farther  than  the  Bucket  Shops  and  assert  that 
he  shall  not  buy  or  sell  a  future  contract — ^^  shall  not 
gamble  in  futures'' —  from  any  of  the  organized  Cot- 
ton Exchanges. 

From  the  foregoing,  the  inference  is  drawn,  that 
Bucket  Shops  are  places  of  gambling,  and  in  confirma- 
tion of  this  we  quote  from  Century  Dictionary. 

^'Bucket  Shop. — An  establishment  conducted  nom- 
inally for  the  transaction  of  a  Stock  Exchange  busi- 
ness, or  a  business  of  similar  character,  but  really  for 
the  registration  of  bets  or  wagers,  usually  for  small 
amounts,  on  the  rise  and  fall  of  prices  of  stocks,  grain, 
oil,  cotton,  etc.  There  being  no  transfer  or  delivery 
of  the  stocks  or  commodities  nominally  dealt  in. 

^ '  Bucket  Shop  operations  are  gambling  transactions 
and  should  be  dealt  with  accordingly." 


Exchanges  85 


ORIGIN  OF  BUCKET   SHOPS. 


Man's  cupidity  leads  him  into  investments,  where 
perhaps,  no  other  influence  would  induce  him  under 
similar  circumstances  to  assume  the  risk  or  undertak- 
ing. This  natural  propensity  evidently  was  the  pri- 
mary motive  that  induced  individuals  to  establish  this 
form  of  business,  knowing  the  gambling  instinct  or 
habit  existed  largely  with  many,  and  those  caring  to 
assume  the  risk  on  varying  contingencies,  would  not 
hesitate  to  hazard  their  money  on  the  rise  and  fall 
of  prices  of  anything  regularly  quoted  and  given  out 
from  the  Exchanges. 

The  New  York  and  New  Orleans  Cotton  Exchanges 
dealing  in  no  less  than  100  bales  (about  50,000 
pounds)  of  cotton,  for  future  delivery,  the  Chicago 
Board  of  Trade,  no  less  than  1,000  bushels  of  wheat, 
5,000  bushels  of  corn  and  oats,  250  barrels  of  pork, 
250  tierces  of  lard  and  50,000  pounds  of  ribs,  made 
the  initial  purchase  of  any  of  these  commodities  be- 
yond the  reach  of  many,  and  to  get  that  class  of  in- 
vestors who  would  take  a  risk  on  a  small  amount,  the 
Bucket  Shop  was  established. 

From  a  few  establishing  themselves  at  tlrst  near 
the  great  Exchanges  and  Boards  of  Trade,  they  grew 
in  number  until  they  had  reached  approximately  25,- 
000,  scattered  in  all  the  States,  before  the  strong  arm 
of  the  law  was  evoked  for  their  destruction. 

The  term  ** Bucket  Shop,''  originated  in  Chicago, 
from  the  best  historical  data  available,  from  among 
members  of  the  Board  of  Trade,  when  trading  was 
dull,  occasionally  some  members  would  call  out,  **I'll 
send  down  to  the  shop  and  get  a  bucket  full,"  refer- 


86  The  American  Cotton  System 

ring  to  the  ^* Shops''  where  a  small  amount  could  be 
gambled  in,  so  the  term  ' '  Bucket  Shop ' '  has  remained 
to  this  day  as  applied  to  stocks,  grain  and  cotton  gam- 
bling establishments,  in  contradistinction  to  the  es- 
tablished legitimate  Exchanges. 

In  their  infancy,  they  wielded  but  little  influence 
for  harm,  but  their  practices  having  grown  to  such 
extensive  proportions,  their  injurious  operations  be- 
came so  alarming  as  to  necessitate  the  intervention  of 
the  law  for  their  complete  eradication. 

It  is  argued  by  members  of  the  Exchanges  that 
legitimate  transactions  in  any  commodity,  maintain 
and  stimulate  prices  for*that  commodity  whether  the 
transaction  apply  to  dealings  in  the  actual  article  or 
for  future  delivery,  such  reasoning  being  founded  on 
good  judgment  and  practical  experience  as  to  actuali- 
ties, but  on  the  other  hand,  where  wagers  are  posted 
as  to  rise  or  fall  in  price  of  any  article,  no  amount 
of  reasoning  can  substantiate  the  claim  that  any  bene- 
fit can  accrue  to  the  price  of  the  article  dealt  in  from 
this  form  of  manipulation. 

To  deal  in  an  article,  real  estate,  live  stock  or  any 
kind  of  investments,  contributes  to  the  stability  of 
prices,  but  to  bet  the  prices  will  be  up  or  down  to- 
morrow, next  day,  or  some  future  time,  add  nothing 
in  support  of  valuations. 

transactions  recognized  and  alleged  to  be  legiti- 
mate ON  the  cotton  exchanges. 

In  the  preceding,  the  author  has  attempted  to  make 
clear  transactions  emanating  from  the  Cotton  Ex- 
changes, the  nature  of  which  were  expressed  as  gam- 


Exchanges  87 

bling  deals ;  this  character  of  business  contrasted  with 
that  of  a  Bucket  Shop,  paralleling  so  closely  as  to  be 
almost  indistinguishable  one  from  the  other. 

Were  all  the  transactions  coming  from  the  Cotton 
Exchanges  similar  in  character  and  meaning,  similar 
in  effect  and  purpose,  as  those  previously  described, 
it  would  be  an  easy  matter  to  establish  laws  so  directed 
as  to  effectually  close  out  such  sources  of  gambling 
opportunities,  but  as  stated  in  their  declaration  of 
purposes,  they  have  a  broad  field  of  usefulness  when 
their  efforts  are  directed  in  legitimate  channels. 

It  would  be  useless  to  argue  that  all  members  of 
the  Cotton  Exchanges  are  men  who  would  not  resort 
to  sharp  practices  to  influence  the  market  to  their  own 
interests,  or  that  they  are  every  one  of  the  most  un- 
questioned integrity,  who  like  Caesar's  wife  must  not 
be  even  suspected,  and  no  breath  of  censure  should 
ever  touch  their  immaculate  reputations,  for  in  that 
body  are,  no  doubt,  individuals  who  would  not  hesi- 
tate to  utilize  any  scheme  of  ingenuity  known  to  them- 
selves to  direct  trading  under  their  surveillance  or  in- 
fluence to  the  end  that  it  would  result  effectually  to 
their  personal  gain  financially. 

This  assumption  is  based  upon  the  broad  idea  of 
human  nature,  that  there  is  to  be  found  in  all  or- 
ganizations composing  financial  bodies,  fraternal  so- 
cieties and  even  religious  orders,  unfit  material;  and 
reasoning  from  this  view-point  a  like  conclusion  may 
not  inappropriately  be  applied  to  tbc  Exchanges. 

THE   CONTRACT  BASIS. 

The  New  York  and  the  New  Orleans  Cotton  Ex- 
changes not  being  associated  for  the  express  purpose 


88  The  American  Cotton  System 

of  handling  spot  cotton,  although  its  members  may 
exercise  the  right  to  act  as  spot  buyers,  brokers  or 
factors  on  their  individual  account,  its  business  is  di- 
rected in  the  line  of  future  trading;  dealing  in  con- 
tracts calling  for  delivery  of  cotton  at  a  future  date, 
is  maintained  for  the  purpose  of  affording  a  con- 
venient method  and  a  ready  market  for  this  class  of 
transactions,  the  utility  of  which  supplying  hedging 
facilities  for  producers,  merchants  and  manufactur- 
ers alike,  the  hedge  operating  as  an  insurance  policy, 
not  against  the  value  of  the  cotton,  but  a  guarantee 
that  the  price  at  delivery  time  will  be  the  same  as 
stated  in  the  contract  when  made,  thus  safe-guard- 
ing the  holder  against  fluctuations,  and  at  nominal 
cost  as  previously  stated,  during  the  time  from  his 
purchase  of  the  actual  cotton  to  the  time  of  its  final 
disposition. 

For  illustration,  Williams  &  Smith,  at  Tyler,  Texas, 
buy  from  farmers'  wagons,  100  bales  of  cotton  dur- 
ing the  first  week  of  September,  at  an  average  cost 
of  10  cents  a  pound,  the  market  at  the  time  varying 
but  little  above  or  below  10  cents,  Williams  &  Smith 
who  receive  the  market  quotations  daily,  hope  to  catch 
the  market  at  a  point  on  which  they  can  sell  at  a 
profit,  but  after  they  have  secured  this  100  bales  and 
the  price  does  not  go  above  10  cents  again,  they  final- 
ly offer  it  to  some  other  buyer  for  10  cents,  which 
price  they  could  not  obtain,  and  as  quotation  after 
quotation  of  the  market  showed  it  to  be  gradually 
declining,  they  seek  to  protect  themselves  by  selling 
100  bales  of  futures — 100  bales  of  Marchs,  say,  for 
which  they  can  get  10^  cents. 

By  way  of  parenthesis  it  may  be  stated,  it  is  not 


Exchanges  89 

always  the  case  one  can  sell  a  near  future  contract 
for  a  margin  of  one-half  cent,  but  to  cover  profit, 
carrying  charges,  such  as  insurance,  loss  in  weight, 
*' country  damage"  and  so  forth,  it  is  assumed  the 
March  contract  has  been  sold  at  this  figure.  Unless 
a  decline  is  anticipated  or  may  seem  imminent,  a  mer- 
chant is  frequently  able  to  sell  a  distant  contract  at 
.a  premium,  and  with  such  assured  premiums,  con- 
tingencies are  overcome  to  a  certain  extent. 

Williams  &  Smith  can  have  two  options  in  making 
disposition  of  this  business. 

1.  Let  it  be  assumed  they  are  willing  to  take  the 
one-half  cent  profit,  and  to  realize  this  amount  with- 
out any  further  loss,  take  shelter  under  the  hedge. 
When  they  sold  this  contract  they  sent  100  dollars 
to  a  New  Orleans  Cotton  Exchange  broker  as  a  mar- 
gin to  protect  him,  who  makes  the  transaction  in  the 
open  on  the  Exchange  floor;  the  100  dollars  is  de- 
manded as  protection  in  case  the  market  goes  up,  for 
they  have  sold  shorty  and  advances  in  price  on  such 
sales  are  losses  to  sellers.  After  making  the  sale  of 
March  futures,  they  immediately  sold  their  100  bales 
of  spots  for  9.85,  losing  15  points,  75  cents  a  bale,  in 
other  words  75  dollars  on  this  spot  transaction;  the 
price  of  futures  in  sympathy  with  bearish  sentiment 
and  spots  having  declined  20  points,  also,  making  a 
gain  of  100  dollars  on  the  future  deal;  on  such  a 
transaction  the  100  dollars  would  be  repaid  to  them 
if  demanded,  less  the  brokerage  15  dollars — $7.50  com- 
mission to  buy  and  the  same  amount  to  sell,  a  futul'e 
contract  of  100  bales.  In  a  procedure  of  this  nature, 
they  gained  on  futures  100  dollars,  and  lost  on  spots 
75  dollars,  and  commission  15  dollars — ai  total  loss 


90  The  American  Cotton  System 

of  90  dollars,  leaving  them  a  net  gain  of  10  dollars. 
This  is  inferring  that  the  transaction  on  the  part  of 
the  Exchange  has  been  legitimate;  no  revision  of  the 
differences  on  the  grades  other  than  middling  were 
had,  and  relative  values  remain  the  same. 

2.  Williams  &  Smith  can  sell  their  spots,  say,  at 
9.85,  accept  the  same  loss  on  it  as  just  stated  in  the 
preceding,  and  should  the  market  continue  to  decline, 
say,  to  9  cents,  they  can  order  their  broker  to  huy  100 
bales  of  futures  for  them,  and  with  this  contract  off- 
set the  one  sold  for  IOI/2,  accepting  the  difference  in 
value,  1^  cents,  less  expenses ;  or  they  can  hold  their 
contract  till  maturity,  say,  January,  February  or 
even  until  March,  demand  the  cotton  on  it,  and  tender 
this  cotton  to  the  purchaser  of  the  original  contract 
in  settlement  for  the  same,  and  the  same  differences 
in  value  would  accrue  to  them  in  this  form  of  settle- 
ment as  to  settle  for  the  difference  in  value. 

It  is  not  usual  for  dealers  in  such  small  quantities 
of  cotton  to  resort  to  the  hedging  function  as  a  pro- 
tection against  a  fluctuating  market,  such  advantages 
being  more  generally  accepted  by  those  firms  and  in- 
dividuals whose  dealings  assume  large  proportions. 

It  would  be  hazardous*  for  large  merchants  who 
buy  cotton  from  customers  in  various*  parts  of  the 
country,  and  who  sell  their  holdings  direct  to  the 
mills,  to  assume  the  entire  risk  of  carrying  such  large 
amounts  without  the  guarantee  given  them  under  the 
hedge;  indeed,  the  risk  would  be  so  great  the  buyer 
would  no  doubt  feel  inclined  to  make  his  offers  for 
purchases,  much  less  than  he  could  afford  to  pay, 
than  where  he  can  handle  with  definite  prices  assured. 


See  pages  91,  92. 


ExchanSes  91 

HEDGING   FUTURE  AND   SPOT    COTTON. 

In  the  case  of  Williams  &  Smith,  it  is  shown  how 
spot  cotton  can  be  hedged,  held  for  future  sale,  or 
sold  at  any  time  desired.  The  buyer  who  cares  to 
sell  the  market  short  can  protect  his  sales  of  futures 
equally  as  well  as  spots. 

Adams  &  Jones,  Memphis,  Tenn.,  believing  from 
the  evidences  they  have  relative  to  the  growing  crop, 
the  demands  of  the  trade,  that  cotton  quoted  in  July 
at  11  cents  is  a  good  sale,  sell  to  American  and  foreign 
spinners  10,000  bales  to  be  delivered  in  September, 
October,  November  and  December  following. 

They  can  not  fortell  with  any  degree  of  accuracy 
what  cotton  will  be  worth  during  these  delivery 
months,  but  in  order  to  protect  themselves,  they  hujj 
10,000  bales  futures,  which  contracts  mature  in  these 
months. 

When  the  sale  was  made  to  the  consumers,  it  will 
be  noted,  they  made  it  direct  with  each  other;  a  con- 
tract having  no  reference  whatever  to  any  Cotton  Ex- 
change and  entirely  independent  of  it. 

This  sale  being  made  at  11  cents,  is  equivalent  in 
value  to  55  dollars  a  bale  of  500  pounds,  aggregating 
in  amount  to  550,000  dollars,  and  to  use  such  a  sum 
as  an  investment  would  be  quite  perilous,  to  overcome 
which,  this  cotton  firm  buys  the  contract  mentioned 
in  the  foregoing  from  some  broker  on  the  Exchange, 
and  here  in  this  character  of  trading  can  well  be 
inserted  the  usefulness  of  such  an  institution,  as  a 
factor  eliminating  risks  in  transactions  in  actual  com- 
modities. 

Let  it  again  be  stated  that  when  this  sale  was  made 


92  The  American  Cotton  System 

Adams  &  Jones  calculating  a  margin  sufficient  to  cover 
expense  of  handling  and  a  profit  for  themselves  when 
closing  the  trade  at  11  cents. 

As  in  the  case  of  selling  100  bales  ^' short  ^'  pre- 
viously mentioned,  so  in  this  instance,  10,000  bales 
have  been  sold  '^shorty''  and  to  consumers  who  are  to 
receive  the  cotton,  and,  not  a  contract  or  contracts, 
although  it  is  not  infrequent  that  settlements  of  such 
business  may  be  had  by  payment  of  differences  in 
value  of  the  contracts. 

Estimating  they  buy  10,000  bales  of  futures  at  10^^ 
cents,  and  as  influences  affecting  prices  of  spots  re- 
flect sympathetically  on  futures;  any  advance  or  de- 
cline correlatively  reflects  on  the  other. 

Let  it  be  assumed  the  market  declines  20  points,  it 
is  very  e\ddent  a  loss  of  one  dollar  a  bale  has  occurred 
on  this  sale  for  forward  delivery,  and  a  gain  of  one 
dollar  on  their  ** short"  sale. 

To  make  this  clear  to  those  who  are  not  fully  con- 
versant with  the  manner  of  estimating  fluctuations, 
it  will  be  observed  that  if  the  market  declines  20  points 
the  price  of  cotton  in  the  open  market  has  dropped 
from  11  to  10.80  cents,  and  a  profit  to  the  seller,  be- 
cause they  can  now  buy  cotton  for  10.80,  which  they 
have  sold  for  11  cents — ^this  decline  does  not  affect  the 
price  made  to  spinners,  by  virtue  of  their  contract 
they  are  held  to  it,  equally  so,  they  would  not  be 
affected  were  the  price  to  advance  to  12  cents,  for 
the  contract  would  then  reflect  on  the  sellers,  who  are 
held  to  a  11  cent  figure — ^were  the  market  to  advance 
20  points,  a  loss  would  appear  to  Adams  &  Jones  as 
the  price  would  then  be  11.20  and  would  cost  them 


Exchanges  9S 

one  dollar  a  bale  above  selling  price  to  buy  spot  cot- 
ton. 

To  overcome  these  contingencies,  spot  buyers,  deal- 
ing heavily  in  cotton,  take  refuge  under  a  hedge 
bought  or  sold  through  some  member  of  the  Cotton 
Exchanges,  for  future  delivery,  practically  insuring 
themselves  against  any  loss. 

Large  dealers  who  buy  cotton  faster  than  they  can 
dispose  of  it,  when  so  purchased  at  figures  from  which 
the  market  shows  a  tendency  to  decline,  protect  such 
purchases  by  selling  futures  as  an  offset. 

In  practice,  they  do  not  necessarily  sell  the  exact 
number  of  bales  they  may  have  on  hand,  but  they 
may  sell  any  amount  in  excess  of  the  actual  spot  cot- 
ton, their  judgment  may  dictate. 

If  Adams  &  Jones  have  10,000  bales  cotton  in  ware- 
houses in  Memphis  in  September,  and  can  dispose  of 
it  at  a  price  satisfactory  to  themselves,  to  be  delivered 
in  some  designated  future  time,  say,  November,  De- 
cember, January  and  February,  in  such  an  instance 
the  hedge  would  be  entirely  unnecessary,  in  fact,  a 
tax  upon  the  contract,  unjustifiable,  as  the  spot  cot- 
ton is  already  in  hand  ready  for  delivery  at  the  ap- 
pointed time,  and  needs  no  protection  further  than 
an  insurance  policy  covering  total  value. 

Spinners  and  millers  manufacturing  yarns  and  fab- 
rics of  different  kinds,  require  the  use  of  different 
grades  of  cotton  and  usually  contract  for  their  sup- 
plies with  cotton  merchants  who  handle  spot  cotton, 
not  caring  to  depend  upon  a  contract  bought  through 
the  Exchanges,  as  any  number  of  grades  up  to  eigh- 
teen may  be  delivered  on  it. 

Suppose  a  mill  requires  the  use  of  500  bales  of 


94  The  American  Cotton  System 

middling  cotton  monthly  and  should  buy  that  amount 
of  futures  through  one  of  the  Exchanges,  and  be 
subjected  to  accepting  any  number  of  eighteen  differ- 
ent grades  upon  the  contract  at  time  of  delivery,  and 
out  of  which  it  could  perhaps  get  only,  say,  100  bales 
middling  cotton,  it  is  obvious  it  would  be  forced  to 
pay  for  400  bales  of  cotton  of  different  grades  that 
it  does  not  want,  hence,  a  contract  of  this  kind 
would  prove  undesirable  to  a  mill. 

Spinners  often  take  advantage  of  the  contract  for 
the  future  market  when  they  sell  their  output  at  good 
prices,  before  manufactured,  and  at  a  time  when 
they  do  not  have  the  cotton  on  hand  from  which  to 
make  the  yarns,  by  protecting  themselves  with  con- 
tracts calling  for  delivery  of  cotton  at  future  dates. 

If  cotton  is  worth  10  cents,  and  sales  of  cotton 
products  are  made  based  on  such  a  price,  the  spin- 
ner can  sell  any  quantity  of  goods  he  may  desire 
and  protect  the  sale  by  purchasing  future  contracts 
sufficient  in  amount  to  cover  the  sale.  In  the  use  of 
the  future  contract  in  these  instances  the  spinner  has 
the  same  protecting  advantage  as  the  spot  cotton  deal- 
er who  protects  his  cotton  with  futures.  If  the  price 
of  cotton  declines  he  loses  on  the  contract  bought,  but . 
can  buy  in  the  open  market,  spot  cotton  at  a  decline, 
the  manufactured  article  from  which  was  sold  on  a 
10  cent  basis  gives  a  corresponding  gain;  the  decline 
in  futures  is  practically  offset  by  the  purchases  of 
spots  at  an  equivalent  decline,  and  the  profit  on  the 
manufactured  goods  remains  undisturbed. 

The  spinner  in  this  case  has  used  the  contract  for 
a  hedging  purpose  only,  and  not  with  the  view  of 
receiving  cotton  on  it.     He  can,  if  he  desires,  carry 


Exchanges  95 

the  contract  to  maturity,  should  the  market  justify 
him,  receive  the  cotton  of  different  grades,  re-sell  it, 
and  buy  with  the  same  money  the  number  of  bales 
of  the  required  class  suitable  for  his  purpose.* 

All  things  being  equal,  in  a  normal  way,  the  pre- 
ceding describes  briefly  the  manner  in  which  spot  or 
future  deals  may  be  eliminated  from  a  field  of  specula- 
tion, the  adventure  being  deprived  of  doubt,  renders 
the  profit  safe  and  sure. 

This  universal  guarantee  to  the  dealer  who  invests 
large  sums  in  cotton,  proves  quite  advantageous  to 
the  trade  and  affords  such  a  protection  to  the  dealer 
as  to  be  almost  incalculable. 

The  preceding  brief  illustrations  are  founded  on 
the  idea  that  all  proceedings  as  given  are  strictly  in 
line  with  the  rules  and  regulations  of  the  Exchanges 
and  are  legitimate  in  scope  and  character. 

As  a  component  part  of  the  present  system  of  hand- 
ling cotton,  the  right  of  contract  for  future  delivery 
seems  so  closely  related  as  to  be  an  inseparable  ({uan- 
tity;  a  factor,  as  a  known  agency,  indespensable  to 
the  successful  operation  of  a  business  in  spot  cotton 
requiring  protection  through  the  hedge. 

The  hedge  would  always  be  a  counterbalancing  feat- 
ure were  the  prices  of  spots  and  futures  to  maintain 
their  relative  equilibrium,  and  any  loss  on  the  one 
would  be  exactly  overcome  by  a  gain  on  the  other,  but 
as  the  price  of  futures  are  at  times  so  greatly  at  vari- 
ance with  that  of  spots,  the  hedge  offers  only  a  par- 
tial cover,  rendering  it  in  such  instances,  of  feeble 


*It  should  be  remembered  that  in  taking  ud  a  list  of  cot- 
ton on  contract,  M.  basis  governs,  and  relative  grades  re- 
ceived are  taken  at  their  grade  value. 


96  The  American  Cotton  System 

import  as  a  protection  in  spot  cotton  transac- 
tion. Investments  in  cotton  protected  by  hedges  are 
subjected  to  influences  that  change  their  value — ^worth 
more  today  and  less  tomorrow — until  a  parity  exists 
between  spots  and  futures,  the  agreement  of  which 
protects  the  hedge. 

In  this  case  the  premiums  or  discounts  on  futures 
are  the  causes  affecting  the  stability  of  the  hedge. 

The  foregoing  statements  descriptive  of  the  utility 
of  the  hedge  in  connection  with  spot  cotton  transac- 
tions are  some  of  the  ways  in  which  it  is  most  uni- 
versally used. 

The  cotton  grower;  the  wholesale  merchant  carry- 
ing in  stock  large  lots  of  cotton  goods;  the  importer 
dealing  in  fabrics  composed  largely  of  cotton ;  the  re- 
tail merchant  who  may  have  his  shelves  loaded  with 
high  priced  merchandise,  of  cotton  manufacture,  all, 
can  take  refuge  under  a  future  contract  hedge. 

It  is  very  rare  to  see  a  grower,  or  retail  merchant 
avail  himself  of  the  opportunity  to  secure  himself 
against  loss,  by  means  of  a  future  contract,  owing  no 
doubt,  to  the  prejudicial  idea  that  this  kind  of  business 
is  morally  wrong,  and  approaches  so  closely  to  gam- 
bling in  its  nature  as  to  preclude  its  usefulness  as  a 
legitimate  factor  in  conservative  business,  in  their 
opinion,  also,  a  want  of  a  thorough  understanding 
of  the  real  functions  of  a  hedge,  as  well  as  the  initial 
cost  to  *  *  get  in ' '  on  such  transactions,  act  as  influences 
in  preventing  many  from  utilizing  its  availability. 

BUYING  AND  SELLING  FUTURE   CONTRACTS. 

John  Adams  having  figured  conspicuously  in  buy- 
ing cotton  from  representatives  of  the  Exchanges  and 


Exchanges  97 

^Bucket  Shops  as  will  be  remembered  in  the  preceding, 
let  us  get  at  the  particulars  by  which  he  **got  in/' 
or  made  his  first  investment. 

The  statement  there,  was,  that  he  made  his  pur- 
chase from  a  representative^  and  not  a  member  of  the 
Exchange,  now  for  purposes  of  illustration  it  will 
be  assumed  that  he  bought  direct  from  a  member 
(firm)  of  the  New  Orleans  Cotton  Exchange,  Messrs. 
Smith  &  Jones,  and  that  John  resides  in  Winona, 
Miss. 

Future  cotton  in  New  Orleans  for  October,  1909, 
was  quoted  at  the  close  at  10.75-76,  May  13th,  and 
John  thinking  the  market  will  still  advance,  wires 
something  like  this: 

*' Winona,  Miss.,  May  13,  1909. 
*' Messrs.  Smith  &  Jones, 

**New  Orleans,  La. 

'*Buy  for  my  account  100  bales  October  at  10.75. 
Check  to  cover  by  mail. 

**JoHN  Adams.  ^' 

If  John  is  known  to  be  reliable  to  Smith  &  Jones, 
the  purchase  would  be  made  at  once,  or  as  soon  as 
the  order  could  be  executed.  If  unknown  to  them, 
they  would  require  some  information  respecting  his 
ability  to  protect  the  purchase,  either  in  cash,  con- 
firmation by  some  bank  or  well  known  reliable  firm,  or 
bank  guarantee. 

Where  cash  is  used,  John  would  remit  any  amount 
he  might  be  able  or  desire  to  invest,  to  some  bank  in 
New  Orleans,  and  check  against  it  when  he  seUs  or 
buys  futures,  or  deposit  in  his  home  bank  100,  200, 


Tage  82. 

7 


98  The  American  Cotton  System 

300  or  more  dollars,  and  when  trading  as  indicated 
by  the  foregoing  wire  order,  have  his  local  banker 
guarantee  the  amount  to  some  New  Orleans  bank,  at 
which  bank  Smith  &  Jones  could  get  their  money  for 
making  the  purchase. 

Where  parties  do  not  have  satisfactory  credit  rat- 
ings, depositing  the  money  in  some  bank  prior  to  in- 
vestment, or  bank  guarantee,  are  the  more  preferable 
plans  for  securing  the  broker  making  the  deals. 

^Members  of  the  Exchange  often  make  deals  for 
one  another,  who  are  bankers,  merchants,  exporters 
and  traders  and  frequently  pay  no  commissions. 

Parties  well  known,  whose  financial  standings  are 
of  undoubted  integrity,  and  who  are  in  many  in- 
stances largely  interested  in  spot  cotton,  have  no 
trouble  in  having  orders  executed  on  short  notice, 
without  an  immediate  remittance. 

Presuming  John's  order  is  all  right  and  accepted, 
he  will  receive  a  reply  something  after  this  manner: 

**John  Adams, 

"Winona,  Miss. 
'*We  have  this  day  bought  for  your  account,  in 
the  New  Orleans  market,  100  bales  of  cotton  for  Oc- 
tober delivery,  etc.,  at  10.75.  Margin  received  on  the 
above,  100  dollars. 

''Yours  respectfully, 

''Smith  &  Jones.'' 

This  reply  received  on  a  printed  slip,  filled  in  by 
hand  or  typewriter,  is  the  evidence  John  has,  showing 
he  has  bought  100  bales  of  future  cotton. 


♦See  Latham  Alexander  &  Co.  in  pamphlet,  "Important 
to  Merchants  and  Planters,"   1908,  page  33. 


Exchanges  99 

The  reader  should  notice  that  John  does  not  receive 
any  contract,  nor  any  copy  of  one,  but  instead  only 
the  notation  on  the  printed  form,  just  mentioned. 
Unless  he  carries  this  contract  to  maturity,  and  goes 
to  New  Orleans  for  the  purpose  of  receiving  the  cot- 
ton on  it,  he  will  never  see  the  contract  nor  a  duplicate 
of  it. 

Should  he  or  his  agent  visit  New  Orleans  to  accept 
the  cotton  on  contract  the  contract  would  be  turned 
over  to  him  on  payment  of  the  cotton  as  represented 
by  its  weights  and  grades,  and  in  accordance  with  the 
rules  of  the  Exchange. 

The  party  who  sold  the  cotton  to  him  has  the  right 
under  the  rules  to  deliver  any  number  of  grades  (18), 
from  good  ordinary  to  fair,*  inclusive — this  repetition 
of  delivery  grades  being  inserted  here  for  clearness 
and  emphasis. 

The  broker  selling  the  cotton  to  John  will  make 
up  an  invoice  of  the  100  bales,  showing  class  and 
weight  of  each  bale,  and  when  so  made  and  presented, 
the  money  in  payment  for  the  cotton  is  due. 

John  has  the  right  to  reject  falsely  or  mixed  packed 
bales,  unless  they  were  sold  to  him  as  such,  '^also,  any 
cotton  lower  in  grade  than  the  lowest  grade  presented 
in  the  seller's  samples."  He  has  the  right  to  reject 
any  bales  weighing  less  than  300  pounds;  any  bales 
with  more  than  6  iron  bands,  exceeding  in  weight 
twelve  (12)  pounds  in  the  aggregate  on  uncompressed 
bales.  Anything  in  excess  of  this  weight  (12  pounds) 
shall  be  deducted  by  him,  or  the  extra  band  removed. 

When  compressed  bales  are  delivered  as  spot  cotton. 


*See  contract,   page   74. 


100  The  American  Cotton  System 

no  deduction  will  be  made  for  the  seventh  band,  but 
three  (3)  pounds  will  be  added  to  the  gross  weight. 

Any  amount  of  bagging  in  excess  of  seven  yards, 
weighing  two  and  a  quarter  pounds  to  the  yard,  shall 
be  considered  unnecessary,  and  shall,  at  the  seller's 
option  be  removed  from  the  bales  before  weighing, 
or  an  allowance  for  the  excess  weight  granted. 

Side  pieces,  half  the  width  of  the  bagging,  running 
the  entire  length  of  the  bale,  are  not  considered  as 
unnecessary,  '*and  shall  not  be  removed  without  the 
authority  of  the  parties  in  interest." 

It  is  the  duty  of  the  seller  to  have  the  cotton  re- 
weighed  in  the  presence  of  the  buyer's  re-weigher. 
Should  the  buyer's  re-weigher  not  appear  at  the  ap- 
pointed time  and  place  for  weighing,  after  having 
been  duly  notified  the  seller  shall  delay  two  hours,  af- 
ter which  he  *^may  proceed  with  the  weighing  with- 
out the  presence  of  the  buyer's  re-weigher." 

Should  damp  or  wet  cotton  be  tendered,  John  can 
reject  its  allowance  in  so  far  as  dampness  appears, 
and  if  both  buyer's  and  seller's  re-weighers  can  not 
agree  as  to  amount  of  excess  weight  for  dampness, 
buyer's  re- weigher  can  demand  the  cotton  not  be 
weighed  until  dry. 

Should  John  doubt  the  accuracy  of  the  scales,  he 
may  have  the  Chief  Surveyor  look  after  them  with  the 
view  of  correcting  any  deficiencies,  should  any  appear. 

After  the  cotton  has  been  weighed  both  parties 
agreeing  to  its  classification,  and  final  payment  made, 
the  delivery  is  recognized  as  complete. 

This  homely  illustration  is  given  to  show  in  a  clear 
and  concise  way,  the  manner  in  which  future  cotton 
contracts  are  carried  to  maturity  and  actual  cotton 


Exchanges  101 

delivered  on  them  in  compliance  with  their  stipula- 
tions. 

SPOT  HOUSES  REFUGE. 

Spot  firms  doing  a  legitimate  trade  in  actual  cot- 
ton which  is  supplied  to  mill  concerns  directly  by 
them,  protect  such  purchasers  with  hedges  from  con- 
tracts secured  through  the  Cotton  Exchanges. 

Consumers  who  depend  on  Spot  Houses  for  their 
requirements,  seek  reliable  firms  for  the  fulfillment 
of  their  contracts,  and  such  firms  making  purchases 
in  satisfaction  of  these  contracts,  protect  fully  80  per 
cent  of  them  with  the  hedge,  leaving  the  minimum 
percentage  in  actual  deals  without  a  hedge,  20  per 
cent.  % 

This  refers  to  those  firms  who  are  daily  in  the  mar- 
ket, and  whose  operations  from  day  to  day  are  con- 
fined to  a  spot  business,  and  on  whose  calculations  and 
quotations  the  interior  buyer  bases  his  prices  to  be 
offered  to  the  grower,  and  how  those  houses  in  the 
legitimate  channels  of  trade  secure  their  requirements 
in  fulfillment  of  the  demands  of  the  spinners,  from 
initial  points,  is  exhibited  in  the  following: 


*This  information  is  official. 


CHAPTER  IV. 
BUYING  SPOT  COTTON. 

To  complete  the  details  of  how  the  great  American 
cotton  crop  is  handled;  how  it  is  moved  from  first 
hands — the  growers — to  its  final  destination,  it  be- 
comes necessary  to  describe  all  the  transactions,  which 
are  literally  confined  to  a  spot  business,  in  addition 
to  those  previously  enumerated  as  set  forth  in  future 
operations  in  connection  with  that  of  spots. 

When  it  is  remembered  that  the  cotton  crop  is 
grown  by  hundreds  of  thousands  of  farmers  in  the 
South;  from  the  most  ignorant  negro  with  his  one, 
two  or  more  bales,  to  the  most  intelligent  culturists 
who  grow  from  five,  ten,  a  hundred,  and  in  some  in- 
stances a  thousand  or  more,  it  can  be  seen  what  a 
great  variety  of  customers  are  to  be  dealt  with  in  a 
business,  the  aggregate  of  which  reaches  into  hundreds 
of  millions  of  dollars  annually  in  the  Southern  cot- 
ton belt. 

The  present  system  having  been  developed  through 
a  series  of  years  is  well  known  to  all  growers  who  offer 
cotton  for  sale  in  its  regular  season,  a  process  very 
simple  in  its  nature,  but  as  to  the  intricacies  and  mul- 
tifarious operations  enveloping  the  business  in  all  its 
ramifications,  the  public  apparently  is  not  so  well  in- 
formed. 

Many  intelligent  growers  seem  to  exercise  but  lit- 
tle forethought  in  marketing  their  cotton,  offering  it 
any  time  it  may  suit  their  fancy,  regardless  of  the 


Exchanges  103 

condition  of  the  market,  the  demand  of  the  trade,  or 
want  of  it ;  heedless  of  the  price,  whether  high  or  low. 

Many  farmers  make  a  practice  of  selling  their  crop 
as  fast  as  gathered;  others  adhere  to  the  idea  of  sell- 
ing a  portion  each  week,  or  month;  still  others  with- 
hold their  entire  crop  until  all  is  gathered  and  sell 
late  in  the  season  or  early  the  in-coming  year. 

A  small  percentage,  comparatively,  consign  cotton 
to  reliable  commission  merchants  to  be  sold  by  them 
for  the  account  of  the  grower,  not  caring  to  trust  the 
disposal  of  their  own  products  in  their  own  hands, 
or  hoping  to  attain  better  results  through  a  commis- 
sion agency. 

To  fully  understand  the  present  system  of  gather- 
ing cotton  from  the  growers  in  all  districts,  near  or 
remote,  it  is  deemed  best  to  follow  the  plans  adopted 
by  some  of  the  leading  spinner  and  export  buyers. 

What  may  be  said  of  one  will  answer  for  all,  as 
the  entire  buying  fraternity  operating  on  a  large  scale, 
whether  buying  in  fulfillment  of  orders,  on  personal 
or  firm  account  for  speculative  purposes,  or  in  com- 
pletion of  contracts  previously  made,  the  plan  is  the 
same,  or  so  nearly  allied  as  to  admit  of  little  distinc- 
tion, whether  the  buyers  are  operating  in  Tennessee, 
Georgia,  Mississippi,  Texas  or  any  other  cotton  pro- 
ducing State. 

Acting  upon  this  idea  as  a  base,  the  reader's  at- 
tention is  directed  to  the  business  system  of  some  of 
the  large  cotton  firms  now  operating  in  Texas. 

A  REPRESENTATIVE   COTTON  FIRM. 

The  principal  offices  of  the  firm  in  question  are,  say, 
in  New  York  and  Liverpool ;  the  membership  compos- 


104  The  American  Cotton  System 

ing  it  are  also  members  of  the  New  York  and  Liverpool 
Cotton  Exchanges,  and  all  the  other  principal  Ex- 
changes of  the  world. 

This  house  is  one  of  the  largest  buyers  of  spot 
cotton  in  the  world,  and  the  character  of  business 
transacted  by  it  in  spot  cotton,  as  before  stated,  is 
indicative  of  the  manner  in  which  other  firms  operate. 

It  has  direct  connection  with  foreign  markets, 
through  branch  offices  in  Bremen,  Germany,  Havre, 
France,  and  many  other  cotton  spinning  or  distribut- 
ing centers,  giving  it  great  advantage  in  securing  a 
broader  outlet  for  the  disposition  of  its  holdings  or 
acquirements. 

It  can  be  stated  appropriately  that  a  large  percent- 
age of  all  dealers  handling  large  investments  in  cot- 
ton are  directly  or  indirectly  represented  in  foreign 
markets  by  and  through  which  medium  greater  facili- 
ties are  offered  for  securing  prompt  sales,  and  enab- 
ling such  dealers  to  be  almost  constantly  in  the  market. 

For  example,  take  a  firm  that  has  branch  houses 
located  at  the  principal  interior  markets,  say  Waco, 
Texas,  as  an  illustration. 

Contributory  Territory. — It  may  be  stated  that  ad- 
jacent towns  handling  cotton  which  finds  exit  through 
the  Waco  district  office  are  among  others,  Oglesby, 
McGregor,  Crawford,  Clifton,  Valley  Mills,  Meridian, 
Morgan,  Whitney,  Blooming  Grove,  Corsicana.  Hills- 
boro,  West,  Hubbard  City,  Marlin,  Bremond,  Lott, 
Eddy,  Lorena,  Moody,  Temple,  Cameron,  Belton  and 
other  towns  on  the  San  Angelo  branch  of  the  Santa 
Fe  Railway,  and  many  others. 

At  some  of  these  points  the  Waco  firm  or  office  has 
salaried  men,  whose  duty  is  the  buying  of  cotton,  ex- 


Buying  Spot  Cotton  105 

clusively,  through  the  season;  at  others  it  has  repre- 
sentatives who  receive  the  daily  quotations  from 
Waco,  and  buy  on  these  quotations  for  the  percentage 
of  profit  they  can  make,  using  the  quotation  as  a  base 
upon  which  to  buy,  the  difference  in  the  quotation 
given  and  the  price  at  which  they  can  buy,  being  the 
margin  of  profit  to  accrue. 

Let  us  assume  that  John  Anderson  represents  the 
Waco  firm  at  Valley  Mills,  and  is  attempting  to  make 
his  wages  by  the  margin  he  can  gain  on  the  purchases 
handled  by  him. 

In  the  first  place,  in  order  to  obtain  a  working  basis, 
the  Waco  house  is  in  close  touch  with  both  the  New 
York  and  New  Orleans  Exchanges,  from  which  it  re- 
ceives constantly  through  the  day,  the  quotations  for 
both  futures  and  the  price  of  spots,  at  the  close  of  the 
market.  From  the  future  quotations  it  calculates  a 
basic  price  to  be  given  all  correspondents  contributing 
cotton  to  it. 

All  places  stated,  being  in  ''common  point  terri- 
tory,^' take  the  same  freight  rate  to  Houston  and 
Galveston.*  From  the  port  price  the  freight,  ex- 
penses of  handling  the  cotton  is  deducted  which  leaves 
the  quotations  for  interior  points. 

Both  the  New  York  and  New  Orleans  Cotton  Ex- 
<jhanges  recognize  certain  future  months  as  ''hedging 
months, ' '  that  is  to  say,  from  such  months  basic  prices 
for  spots  are  calculated  as  the  ruling  spot  prices  for 
any  interior  territory. 

In  May,  1909,  the  governing  months — the  months 
most  actively  dealt  in — were  July  and  October,  and 


*Foot  note  page  106. 


106  The  American  Cotton  System 

stating  July  futures  as  being  quoted  at  10.78,  say- 
May  12th,  from  such  a  figure  a  working  basis  would 
be  calculated  something  after  this  manner: 

July    futures 10.78 

Good  middling  premium ....       35  points  better 


Good  middling  value  N.  O.. .  11.13 

Taking  Galveston  as  a  port  price  to  be  calculated 
with  New  Orleans  good  middling  value. 

Then  we  have  this  value 11.13 

Freight  to  Galveston  (per  hundred) .  .   .55 

Brokerage 03 

Expenses  and  margin  for  profit 121/2 

Points  to  be  deducted ..;...; .701/^ 

Good  mid.  value  at  interior  points. . .  10.43^2 

Good  middling  value I0.43i/^ 

Less  for  middling  value 37i/^ 

Middling  value  at  interior  points. 10.06 

The  comparative  value  of  actual  cotton  with  futures 
varies  frequently  according  to  spinners'  demand,  but 
this  example  shows  the  transaction  when  spots  and 
futures  are  running  together. 

Getting  this  middling  value  for  all  interior  points 
taking  the  55  cent  rate,  the  Waco  house  would  give 
to  all  its  correspondents  a  basis  of  about  IO.O614  or 
lO^ig^.      That   is,    it   will   take   all   cotton   its   repre- 


*  Galveston  55   cents  per  hundred;   Houston,   49   cents 
per  hundred. 


Buying  Spot  Cotton  107 

sentatives  buy  at  this  figure  for  middling  cotton  and 
any  correspondent  buying  on  this  basis  would  neces- 
sarily have  to  buy  at  a  lower  figure  to  gain  a  margin 
for  himself. 

This  price  would  be  net  to  the  buyer  at  his  place 
of  buying.  The  grades  above  and  below  middling  in 
value  would  bear  a  premium  or  discount  quoted  to 
them  by  the  Waco  firm. 

Adding  for  strict  middling  i\  and  for  good  mid- 
dling %,  would  make  these  grades  worth  101/4  and 
IOt^;  deducting  for  strict  low  middling  i\  and 
low  middling  100  points,  would  give  for  these  lower 
grades  9|  and  9yV  • 

For  practical  purposes  these  five  grades  will  suffice 
to  illustrate  the  idea  intended. 

We  will  suppose  Mr.  Anderson  receives  the  above 
' 'limit '^  as  the  opening  price  for  the  day;  if  per- 
chance, a  grower  had  driven  on  the  streets  of  Valley 
Mills,  with  3  bales  of  cotton  on  his  wagon  before  nine 
o'clock  in  the  morning,  offering  his  cotton  to  any 
buyer  who  would  give  the  highest  price;  whether 
there  were  one  or  more  buyers  at  this  place,  the 
grower  would  be  told,  ''The  market  has  not  come  in 
yet, ' '  and  perhaps  further,  "  I  do  not  care  to  buy  until 
I  get  the  market,"  or,  "I  have  not  received  my  limit 
yet,  and  prefer  to  hold  off  until  I  get  the  market.'' 

These  and  similar  expressions  are  often  heard  from 
initial  buyers;  men  whose  activities  in  the  line  of  cot- 
ton buying  lead  them  to  exercise  their  wits  to  the  best 
advantages  possible  from  the  view-point  of  their  side 
of  the  question;  men  whose  mercenary  motives  are, 
perhaps,  not  above  that  of  their  fellow-men,  yet  their 
inherent  desire  to  gain  a  competency  through  cotton 


108  The  American  Cotton  System 

transactions,  has  given  cause  for  those  unacquainted 
with  the  inside  workings  of  the  cotton  market,  to  ac- 
cuse spot  buyers  of  taking  undue  advantage  of  the 
farmer  when  offering  his  cotton  for  sale. 

Had  the  market  closed  lower  the  day  previous  to 
the  one  on  which  the  farmer  brought  his  cotton  to  mar- 
ket, the  buyer  would  readily  say,  *^The  market  was 
a  little  off  yesterday,  and  I  look  for  a  lower  market 
today,  as  yesterday's  cables  stated  that  Liverpool 
bought  only  6,000  bales;  Manchester  spinners  were 
practically  out  of  the  market,  and  exporters  claim 
that  they  are  receiving  but  few  orders  for  immediate 
or  forward  delivery;  futures  were  down  10  to  12 
points."  Such  statements,  or  those  of  similar  im- 
port, quite  frequently  induce  growers  to  sell  at  once 
for  fear  of  a  further  decline  and  further  loss  on  their 
part. 

Had  the  market  closed  higher  the  day  before,  the 
honest  buyer,  the  buyer  who  executes  all  his  cotton 
transactions  with  fairness,  would  be  just  as  ready  to 
tell  the  grower,  the  market  was  up  the  day  previous, 
and  from  all  information  at  his  hands,  the  probabili- 
ties were,  '*We  will  see  a  better  market  today,"  or 
something  similar. 

Parenthetically  speaking,  it  is  not  always  a  wise 
policy  to  attempt  to  forecast  the  market  to  prospective 
sellers,  for  reasons  that  are  obvious  even  to  a  novice. 

Now,  let  us  take  up  Mr.  Farmer  again;  he  has  his 
wagon  on  the  street  with  its  three  bales  of  cotton;  he 
has  waited  for  'Hhe  market  to  come  in,"  and  perhaps 
by  this  time  a  dozen  or  more  farmers  have  appeared; 
some  with  one,  some  with  two,  some  with  three,  four, 


Buying  Spot  Cotton  109 

five  or  probably  six  or  eight  bales  of  cotton  on  wagons, 
totaling  fifty  or  sixty  bales  ready  to  be  sold. 

A  buyer  going  to  the  wagon  in  the  presence  of  the 
farmer  or  farmers — many  times  ten,  twelve,  fifteen 
or  more  farmers  will  stand  by  the  buyer  and  watch 
him  closely  as  he  proceeds — cuts  a  slit  ten  to  twenty 
inches  crosswise  the  bale  between  two  of  the  bands, 
taking  from  this  opening  a  sample  of  the  cotton  of 
perhaps  four  to  six  ounces,  examining  it  carefully  for 
dirt,  stain,  trash,  gin  cuts  or  any  foreign  substance, 
and  classes  it  mentally  as  to  grade — after  examining 
this  sample  he  cuts  the  other  side  of  the  bale  similarly, 
going  through  the  same  proceeding  as  at  first. 

After  one  buyer  draws  a  sample,  others  often  do 
the  same  thing  from  the  same  cut;  all  samples  being 
thrown  back  in  the  wagon. 

The  cotton  is  generally  weighed  by  public  weighers, 
who  usually  get  the  samples,  which  go  largely  towards 
making  the  **city  crop.'' 

It  is  rare  that  both  sides  of  the  bale  show  identi- 
cally similar  cotton,  in  such  instances  the  buyer  makes 
his  offer  on  the  side  showing  lowest  grade,  unless  it 
is  apparent  beyond  a  doubt,  that  the  low  grade  is 
superficial  and  not  of  sufficient  importance  in  amount 
to  affect  the  whole  bale,  then  in  such  cases,  the  cotton 
is  taken  at  its  true  grade  on  best  portion. 

It  sometimes  becomes  necessary,  especially,  late  in 
the  season,  to  examine  the  ends  of  the  bales  to  ascer- 
tain the  mixed  nature  of  the  cotton  that  may  be  in 
the  bale,  by  reason  of  rain,  frost,  etc. 

The  buyer  having  examined  Mr.  Farmer's  three 
bales  of  cotton,  finds  by  calculation,  that  they  average 
middling  in  grade,  and  he  having  received  a  limit 


110  The  American  Cotton  System 

of  10 xV  for  such  grade,  offers  9.95  all  round  for  it 
perhaps  another  buyer  will  offer  9.97^2 ;  the  first 
buyer  will,  if  he  cares  to  handle  it  for  iV  profit, 
make  a  counter  offer  in  competition  of  10  cents; 
should  the  second  buyer  not  raise  this  bid,  the  cot- 
ton is  sold  for  10  cents  and  paid  for  immediately. 

As  the  day  proceeds,  should  the  market  decline 
iV  or  Ys,  the  Waco  house  will  at  once  notify  all 
buyers  for  it  to  reduce  their  limits  accordingly,  and 
report  the  amount  of  cotton  which  they  have  bought 
on  first  limit  up  to  this  time. 

Should  the  market  advance  during  the  day  as  much 
as  a  sixteenth  or  an  eighth,  the  house  immediately 
notifies  its  buyers,  that  they  may  be  kept  in  position 
to  offer  competitive  prices. 

What  Mr.  Anderson  has  done  at  Valley  Mills  for 
himself — for  the  Waco  firm — has  been  done  by  all 
buyers  for  this  house,  at  the  other  representative 
points  adjacent  to  this  firm's  territory. 

All  buyers  report  to  the  Waco  office  at  the  close 
of  the  day's  business,  and  up  to  9  a.  m.,  before  mak- 
ing final  closing  for  the  day. 

After  nightfall,  frequently  local  buyers  through  the 
telephone  system,  buy  more  cotton  from  small  deal- 
ers in  general  merchandise,  who  accumulate  stocks 
of  cotton  on  mercantile  accounts,  and  from  ginners  in 
different  portions  of  their  respective  counties. 

When  all  buyers  make  their  final  daily  report,  the 
Waco  office  knows  at  once  the  total  purchases  for  the 
day  in  its  territory,  and  in  like  manner  reports  by 
telegraph  or  cable  the  result  to  the  parent  office  in 
New  York  or  Liverpool. 


Buying  Spot  Cotton  111 

The  total  purchases  vary  in  daily  transactions; 
amounting  some  days  to  a  thousand  or  more  bales. 

As  bought  stocks  accumulate  at  the  different  points, 
gathered  by  buyers  making  purchases  on  quoted  limi- 
tations, the  ''take-up  man"  makes  the  rounds  over 
the  district,  after  previously  notifying  these  different 
buyers  the  date  he  will  visit  and  take  up  the  cotton 
bought;  the  buyers  before  the  arrival  of  the  classer 
C take-up  man")  arrange  the  cotton  bales  in  rows 
or  suitable  shape  to  be  gone  over  to  best  advantage; 
the  buyer  and  classer  go  over  the  list  in  this  way: 
The  bales  lying  on  their  edges  in  rows,  usually  touch- 
ing each  other,  the  classer  will  cut  the  bales  on  the 
top  side,  cutting  the  bagging  in  a  different  place  to 
the  original  cut,  between  different  bands,  cutting 
deeper  and  extracting  a  sample  of  fully  eight  ounces 
therefrom;  samples  are  drawn  after  the  cotton  is 
weighed;  as  the  bales  are  sampled  and  classed,  the 
classer  attaches  a  tag  to  each  bale  showing  the  firm 
name  thereon,  also  the  number  of  the  bale — the  bales 
being  numbered  consecutively — such  tags  being  print- 
ed in  duplicate  form,  a  portion  of  the  tag  is  torn  off, 
this  is  wrapped  inside  the  sample,  corresponding  iden- 
tically to  the  number  on  the  tag  on  the  bale.  As  sam- 
ples are  drawn  in  which  are  folded  the  duplicate  tag 
numbers,  the  samples  are  packed  closely  in  a  sack  pre- 
pared for  such  purposes,  and  forwarded  to  the  Waco 
office. 

CONCENTRATION. 

Assembling  cotton  at  these  various  initial  buying 
points,  results  in  accumulating  a  quantity  of  cotton 


112  The  American  Cotton  System 

of  a  very  mixed  number  of  grades,  all  bought  on  a 
basis  price. 

After  the  ''take-up  man"  has  gone  through  the  dif- 
ferent lists,  and  settled  with  the  different  buyers  on 
the  basis  of  the  grades  and  weights  shown,  the  cotton 
is  located  into  the  compress  at  Waco  or  some  desig- 
nated point  for  compression,  before  its  start  to  final 
destination  on  through  bills  of  lading. 

During  the  busy  portion  of  the  cotton  season,  cot- 
ton accumulates  very  rapidly  daily  at  the  compresses, 
a  large  percentage  of  which  has  been  sold  for  forward 
delivery  before  arrival,  principally  to  consumers 
whose  requirements  stipulate  specific  grades,  and  to 
secure  these  definite  grades  necessitates  the  constant 
presence  at  the  compress  or  place  of  concentration,  ex- 
pert classers,  who  go  through  these  diverse  numbers 
of  shipments  of  miscellaneous  grades,  assorting  them 
into  even  running  classes  as  are  required  on  the  or- 
ders to  go  out. 

To  keep  track  of  these  orders,  it  is  usual  to  give 
to  each  a  distinct  number,  as  No.  23,  250  bales  strict 
middling.  Fall  River,  Mass.;  No.  24,  300  bales  low 
middling,  Osaka,  Japan;  No.  25,  100  bales  good  mid- 
dling, Providence,  K  I.;  No.  26,  600  bales  middling, 
Barcelona,  Spain,  etc. 

Selling  cotton  to  spinners  whose  restrictions  limit 
the  classificatign  to  specific  grades,  give  cause  for  the 
operator  to  demand  and  secure  better  prices  for  such 
character  of  cotton,  and,  indeed,  buyers  who  secure 
their  requirements  exacting  supplies  so  restrictive  in 
nature,  generally  offer  a  premium  above  basic  figures 
as  an  inducement  to  get  the  necessary  grades. 

Buying   all   grades   of   cotton   from   a   variety   of 


^     OF   THE 

UNIVERSITY 


Of 


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FOR^V^-- 


UNIVC^^SITY 

Buying  Spot  Cotton  113 

sources,  over  a  broad  area  of  territory,  assembling 
the  same  at  some  convenient  point  suitable  for  con- 
centration, frequently  leaves,  after  all  classified  lists 
have  been  made  up,  a  mass  of  odds  and  ends  of  a 
nondescript  cotton,  the  value  of  which  may  be,  per- 
haps, thousands  of  dollars,  to  be  carried  for  indefinite 
periods,  with  such  costs  as  insurance,  storage  and  in- 
terest added,  before  a  satisfactory  outlet  can  be  had 
justifying  its  sale,  this  is  especially  so  after  excessive 
and  continued  rainfall,  or  during  the  termination  of 
the  cotton  season. 

There  is  no  getting  away  from  the  necessity  of 
carrying  this  excess  of  accumulation  of  low  grade 
cottons,  unless  the  demand  of  the  trade  is  so  impera- 
tive as  to  practically  exhaust  all  offerings  as  fast  as 
tendered. 

Payment  of  the  different  lists  prepared  for  ship- 
ment as  stated  in  the  preceding,  becomes  a  matter 
now  of  prime  importance  to  the  seller,  and  a  subject 
of  vital  consideration  to  the  reader. 

The  domestic  shipments  to  Fall  River  and  Provi- 
dence are  handled  as  any  local  shipment,  the  docu- 
ments of  which  are  the  B/L,  invoice  and  sight  draft, 
the  proceedings  through  the  local  bank,  as  stated  in  a 
previous  portion  of  this  work. 

Payments  on  sales  destined  for  foreign  shipment 
are  made  in  accordance  with  the  terms  of  the  sale,  the 
buyers  usually  stipulating  the  procedure  required  on 
their  part,  designating  through  what  banks,  the  char- 
acter of  the  documents  to  accompany  the  draft,  etc., 
shall  go. 


114  The  American  Cotton  System 

Shipments  to  Barcelona,  Spain,  are  usually  paiu 
for  through  exchange  on  London  or  Paris,  France; 
those  directed  to  Japan  are  generally  based  on  Eng- 
lish reimbursement,  with  drafts  at  60  or  90  days  on 
London  or  New  York. 

New  York  banks  handling  drafts  covering  ship- 
ments of  cotton  for  foreign  account,  handle  the  same 
at  the  current  rate  of  exchange  prevailing  on  the 
country  on  which  they  are  drawn  at  the  time. 

As  the  rates  of  exchange  on  foreign  commercial  cen- 
ters vary  from  time  to  time,  it  is  of  course  dependent 
on  whether  the  draft  is  drawn  at  60,  90,  120  or  180 
days  in  determining  the  discount  or  premium,  and 
the  demand  for  the  exchange,  etc. 

Foreign  bills  of  lading  usually  read  to  shipper's 
order  or  to  the  order  of  some  party  who  must  en- 
dorse the  bill  of  lading  so  that  it  becomes  at  once  a 
negotiable  draft. 

The  statement  here  represents  £i  cotton  firm  cen- 
trally located  at  Waco,  Texas,  and  shows  the  firm  to 
be  constantly  in  the  market  during  the  time  these  op- 
erations are  being  had. 

Occurences  are  not  unusual  for  firms  operating  en- 
tirely independent  of  others,  to  find  themselves  active- 
ly engaged  in  the  cotton  trade,  putting  out  limits  to 
their  representatives  when  at  the  time  all  orders 
have  been  filled,  but  to  maintain  their  position  with 
the  trade  necessitates  constant  buying.* 

For  example :  Vancleve  &  Hoyt  in  Raleigh,  N.  C, 
September  28,  1908,  completed  the  fulfillment  of  an 


*0n  the  completion  of  orders,  buyers  will  sometimes 
keep  out  of  the  market,  if  it  shows  to  be  very  erratic. 


»  Buying  Spot  Cotton  115 

order  of  2000  B/C ;  now,  on  the  morning  of  the  29th, 
they  put  out  limits  as  usual  but  made  them  to  con- 
form to  current  quotations  prevailing  as  previously, 
not  knowing  whether  gains  or  losses  will  occur  on 
such  purchase. 

At  such  times,  however,  operators  are  busily  en- 
gaged in  efforts  to  place  cotton  to  cover  that  bought, 
and  to  be  bought. 

Suppose  spots  to  be  worth  in  Raleigh  9.80  M/B, 
and  Vancleve  &  Iloyt  buy  200  bales  in  the  open  mar- 
ket before  placing  an  order,  and  succeed  in  selling 
500  bales  at  9.90  during  the  day  with  no  further  ad- 
vance in  the  market,  their  succeeding  limits  would 
be  put  out  at  quoted  market  values;  should  the  mar- 
ket decline  they  would  follow  it  with  reduced  lim- 
its, equally  so  succeeded  by  increased  ones,  were  the 
market  to  advance. 

It  is  noted  this  Raleigh  firm  had  200  bales  on  hand 
when  the  short  sale  of  500  bales  was  made,  and 
should  there  be  no  variation  of  any  appreciable  ex- 
tent for  twenty-four  hours,  it  is  quite  probable  the 
order  would  be  filled  at  current  quotations,  and  a 
gain  of  10  points  or  50  cents  on  the  bale  within  this 
time.  Were  the  market  to  decline  a  sixteenth  or  an 
eighth,  these  proportional  amounts  would  accrue  as 
an  additional  gain  to  the  10  points,  that  is,  the  sale 
was  made  at  10  points  above  quotations,  and  if  follow- 
ed by  a  decline  of  one-sixteenth  (6i/4  points)  then  a 
gain  would  be  had  of  10 -[-61/4=161/4  points,  equalling 
811/4  cents  on  each  500  pound  bale. 

The  character  of  the  business  handled  by  the  sal- 
aried buyers  is  the  same  in  substance  as  a  representa- 
tive one  buying  on  limits,  except  no  classer  (take-up 


116  The  American  Cotton  System 

man)  is  necessary  to  visit  their  place  of  buying,  and 
take  up  any  cotton  bought  by  them,  as  such  men  are 
well  versed  in  classification  themselves;  they  merely 
keeping  record  of  their  transactions,  and  sending  in 
samples  to  the  office,  of  all  cotton  bought.  They  may 
be  moved  from  place  to  place  during  the  season  as 
circumstances  may  demand. 

Quotations  on  which  to  base  their  operations  are 
given  them  often  during  the  day,  should  the  market 
show  variations  sufficient  in  amount  to  justify  chang- 
ing. 

cotton  guarantees. 

Cotton  sold  to  be  delivered  on  contracts  in  the 
future,  bought  on  the  New  Orleans  or  New  York 
Cotton  Exchanges,  require  no  guarantee  as  to  weights 
and  grades,  as  the  rules  prescribed  by  them  for  such 
contracts,  determine  the  manner  in  which  deliveries 
shall  be  made. 

Cotton  bought  at  one  point  to  be  delivered  at  some 
other,  where  the  buyer  does  not  take  up  the  cotton 
at  place  of  purchase,  must  be  accompanied  by  a  guar- 
antee protecting  the  quality  and  weight  or  class  mark,* 
unless  the  buyer  accepts  the  seller's  weights  and 
grades. 

Cotton  sold  for  foreign  trade  is  invoiced  at  full  or 
gross  weights,  and  the  same  weights  at  landing  on 
the  other  side  must  be  guaranteed  within  one  per  cent 


♦Many  dealers  who  operate  on  a  large  scale  use  "class 
marks,"  and  sell  cotton  on  them  instead  of  grades;  as 
WACO  for  good  middling;  TOWN  strict  middling;  DOAN, 
middling,  etc.;  and  buyers  familiar  with  the  usages  of 
such  customers,  buy  on  such  class  marks  from  them,  in- 
stead of  grade  as  a  quality. 


Buying  Spot  Cotton  117 

of  those  shown  in  the  invoice,  when  destined  for  Ger- 
man ports.  Such  requirements  for  other  European 
ports  are  similar  or  nearly  so. 

Where  shipments  do  not  come  within  one  whole 
grade  of  the  quality  designated  as  a  guaranteed  aver- 
age, a  small  penalty  is  attached,  to  be  paid  the  buyer, 
in  addition  to  the  loss  on  the  grade. 

Sec.  43.  All  cotton  shall  be  weighed  and  invoiced  at  full 
weights. 

Allowances  in  weight  for  damp  or  damage  shall  be 
specially  deducted  in  the  invoice. 

Bales  of  North  Americin  Cotton  weighing  less  than  135 
(298  lbs.)  or  more  than  300  (662  lbs.)  kilos  gross  may 
not  be  tendered. 

Sec.  44.  The  allowance  for  Tare  on  American  cotton 
shall  be  four  per  cent  on  the  gross  weight  after  deducting 
the  weight  of  iron  bands  and  ropes.  If  the  tare  exceeds 
four  per  cent  on  the  average  of  the  whole  lot,  the  excess 
shall  be  paid  by  the  seller. 

The  actual  tare  shall  be  ascertained  by  stripping  ten  per 
cent  of  the  original  bales,  but  not  less  than  five  bales,  and 
weighing  the  tares,  and  the  average  weight  of  the  tares 
of  the  bales  stripped  shall  be  taken  as  the  tare  per  bale 
for  the  whole  lot. 

In  ascertaining  actual  tare,  buyer  and  seller  shall  each 
select  one-half  the  bales  to  be  tared.* 

Prom  the  preceding  it  is  seen  a  4%  tare  is  exacted 
after  removal  of  the  ''bands  and  ropes, ^'  the  which 
if  added  as  an  excess  tare  would  approximate  6%, 
which  is  about  the  usual  deduction  made  in  spot 
transactions  for  foreign  account. 

CENTRAL   BUYING   POINTS. 

In  the  preceding  section  descriptive  of  ''spot  cot- 
ton buying,''  the  territory  given  is  located  at  Waco, 
Texas,  as  a  central  buying  point. 


♦From  Rules  of  the  Bremen  Cotton  Exchange. 


118  The  American  Cotton  System 

In  Texas  are  several  such  points,  all  of  which  have 
a  number  of  buyers,  especially  during  the  fall  sea- 
son when  the  trade  is  very  active,  and  from  such 
places  as  central  points  may  be  mentioned  Galveston, 
Houston,  San  Antonio,  Ft.  Worth,  Dallas  and  Texar- 
kana,  from  which  the  trade  is  handled  as  described 
for  that  of  Waco  territory. 

Similarly,  the  system  prevails  in  Little  Rock,  Mem- 
phis, Natchez,  New  Orleans,  Mobile,  Montgomery,  At- 
lanta, Savannah,  Augusta,  and  Charleston. 

To  read  clearly  the  description  briefly  stated  for 
buying  spot  cotton,  described  for  Waco,  will  succinct- 
ly give  the  American  system  of  handling  spot  cotton 
in  the  entire  South,  in  connection  with  portions  of 
other  parts  of  this  work. 

short  selling  spot  cotton. 

It  will  be  remembered  in  the  immediate  preceding, 
the  statement  of  how  spot  buyers  in  makiing  purchases 
from  the  growers  at  primary  points,  bought  exclu- 
sively on  *' limits''  and  by  salaried  employees. 

Now,  those  buying  exclusively  on  limits,  that  is,  at 
prices  for  purchases  given  them  by  some  one  else, 
and  any  reward  for  such  purchases  to  buyers  for  their 
time,  their  skill  and  labor,  must  be  had  from  buying 
at  a  less  figure  than  stated  in  the  '  ^  limit. ''  In  such 
purchase,  the  buyer  knows  before  he  buys  just  what 
he  is  to  get  for  the  cotton  bought,  and  when  bought 
on  a  narrow  margin,  his  classification  must  be  cor- 
rect— -that  is,  just  as  the  classer  would  class  it  who 
takes  it  up — or  he  will  meet  with  a  loss  in  this  direc- 
tion. 


Buying  Spot  Cotton  119 

In  the  South  are  large  numbers  of  buyers  who  re- 
ceive limits,  and  deliver  cotton  on  them,  but  generally 
speaking,  they  '/take  the  market,"  by  arranging  with 
sQme  telephone  or  telegraph  company  to  supply  them 
regularly  through  each  business  day  through  the  sea- 
son, with  the  quotations  from  the  Cotton  Exchanges, 
from  which  they  calculate  a  basis  price  and  make  in 
this  way  their  own  limits,  or  middling  cotton  price, 
governed  by  dealers  at  the  large  cotton  centers  to  ad- 
vise them  as  to  the  amount  of  differences  ''on"  or 
"off"  for  the  grades  above  or  below  that  grade,  little 
attention  being  had  for  such  differences  as  may  have 
been  designated  by  the  exchanges. 

Were  the  differences  always  measured  by  the  Re- 
vision Committee  of  the  Cotton  Exchanges,  followed 
implicitly  by  spot  dealers,  it  would  be  quite  easy  to 
determine  with  accuracy  the  value  of  all  the  relative 
grades,  but  more  frequently  the  reverse  obtains,  as 
firms  handling  spot  cotton  extensively,  do  not  always 
agree  with  the  Cotton  Exchanges  as  to  the  value  of 
major  or  minor  grades,  which  fact  within  itself  af- 
fect the  prices  more  or  less  to  be  offered  the  grower, 
and  to  him  it  may  seem  puzzling  to  understand  why 
one  buyer  will  pay  more  for  a  certain  class  of  cotton 
than  some  other. 

Our  large  metropolitan  daily  and  weekly  newspa- 
pers devote  ample  space  to  the  market  quotations; 
those  of  the  South  exhibiting,  especially,  a  character 
of  reports  that  are  replete  and  significant  on  cotton, 
not  only  quoting  the  prices  of  spots  and  futures  in 
the  New  York  and  New  Orleans  markets,  but  briefly 
giving  the  values  of  cotton  in  some  of  the  foreign 
cotton   centers,  also. 


120  The  American  Cotton  System 

To  better  understand  the  statement,  let  us  quote 
the  New  Orleans  cotton  market  for  spots,  say  May 
28,  1909. 

Ordinary 8^^ 

Good  ordinary 9^6 

Low  middling 10  iV 

Middling- 11 

Good  middling 11% 

Middling  fair  .  .  11% 

Note  that  L.  M.  is  tV  and  G.  0.  1  i\  off  from 
M.,  G.  M.  %,  and  M.  F.  %  ^'on.'^  Now,  at  this 
time  spot  buyers  would  make  for  G.  0.  about  250  and 
L.  M.  125  points  off  from  M.,  while  for  the  premiums 
on  G.  M.  and  M.  F.  they  would  probably  accept  them 
as  given  in  the  quotations. 

Should  a  farmer  offer  a  L.  M.  bale  of  cotton  at 
some  interior  place  having  a  freight  rate  to  New  Or- 
leans of  50  cents  a  hundred,  this  seeing  from 
his  paper  that  M.  cotton  is  given  at  11  cents  valua- 
tion in  New  Orleans  would  assume  it  to  be  IOI/2  at 
his  market  and  for  L.  M.  would  command  a  figure 
yV  less,  or  in  other  words  9  if,  but  when  told 
by  the  buyer  that  such  cotton  is  125  points  off  from 
M.  he  does  not  understand  why  such  a  divergence 
from  the  quoted  market,  and  instead  of  9|f ,  he  can 
get  only  914. 

The  cause  of  this  difference  is  this:  Cotton  de- 
livered on  contracts  in  New  Orleans  would  be  accepted 
at  the  differences  stated  in  the  official  quotations,  but 
as  hundreds  of  thousands  of  bales  of  cotton  are  han- 
dled annually  by  spot  merchants  who  buy  and  sell 
independently  of  the  Cotton  Exchanges,  the  consumed 


Buying  Spot  Cotton  121 

to  a  large  extent  is  the  factor  determining  the  value 
of  the  differences,  and  those  buying  from  the  growers, 
who  in  turn  sell  to  mill  representatives,  are  governed 
by  the  differences  given  them  by  such  representa- 
tives, hence  this  disparity  between  the  official  cotton 
quotations  and  what  the  spot  buyer  pays  at  primary 
points  for  the  relative  grades. 

No  doubt  unscrupulous  buyers  many  times  take  ad- 
vantage of  these  discrepancies  in  quoted  and,  paid 
values,  and  through  such  sources  the  farmer  finds  him- 
self mulct  by  virtue  of  his  want  of  knowledge  of  the 
true  conditions,  that  surround  the  marketing  of  his 
own  productions. 

Now,  spot  buyers  buying  for  various  representa- 
tives or  for  mills  using  a  variety  of  cotton,  have  quite 
an  advantage  over  a  buyer  who  buys  for  only  one  firm, 
as  it  happens  that  one  firm  from  different  causes 
may  find  itself  at  times  without  orders,  and  at  such 
times  it  is  not  in  the  market  and  a  buyer  for  such  a 
firm  does  not  care  to  buy  at  his  own  risk,  but  where  a 
buyer  has  several  correspondents  it  is  hardly  possible 
to  catch  him  not  in  the  market,  and  through  these 
many  outlets,  some  of  whom  have  wider  differences 
that  others,  he  can  offer  better  -  figures  for  certain 
grades  required  of  this  class  of  customers  than  those 
who  have  narrow  representation. 

Hundreds  of  thousands  of  bales  are  handled  an- 
nually by  a  large  number  of  buyers  who  take  their 
cotton  direct  from  the  farmers ;  such  buyers  as  stated, 
receive  the  daily  Exchange  quotations,  in  connection 
with  frequent  communications  with  spot  dealers,  cal- 
culate their  own  home  price,  and  from  all  informa- 
tion from  all  sources,  added  to  their  own  judgment 


122  The  AMEkiCAN  Cotton  System 

and  business  sagacity,  direct  their  efforts  in  lines  of 
speculation  that  seem  to  offer  best  returns. 

Spot  buyers  in  the  interior,  whether  large  or  small, 
who  have  no  direct  nor  indirect  connection  with  any 
of  the  Cotton  Exchanges;  who  like  the  farmers  un- 
organized, can  not  manipulate  the  cotton  markets  as 
the  members  of  the  great  Exchanges  can  do,  naturally 
take  the  sensible  side  of  any  proposition  oft'ering, 
when  exercising  their  faculties  as  to  the  probable  re- 
sults that  might  accrue  upon  any  action  of  their  own. 

Evidences  existing  indicating  a  large  yield,  light 
demand,  and  a  rapid  movement  to  market,  would  be 
sufficient  to  induce  an  inference  by  any  reasonable 
person  that  a  decline  in  the  market  would  logically 
occur,  and  until  something  should  arise  to  more  than 
counterbalance  these  depressing  influences,  the  proba- 
bilities of  an  advance  under  such  pressure  would  not 
likely  take  place.  This  is  reasoning  from  the  stand- 
point of  light  demand,  and  assuming  demand  or  want 
of  it  to  be  a  governing  factor,  any  intelligent  buyer 
would  not  hesitate  to  ''sell  the  market  short"  under 
such  considerations  and  conditions  and  reserve  the 
right  to  feel  his  actions  were  guided  by  business 
judgment. 

Such  evidence  existing  as  to  indicate  a  decline, 
would  be  broadcast,  and  while  its  inception  might  be 
endemic,  the  contagion  spreads  until  the  entire  buying 
fraternity,  with  scattered  exceptions  here  and  there, 
have  ''sold  short,''  more  especially  if  the  price  for  the 
sale  be  inviting ;  under  this  influence  and  pressure  the 
market  sags;  each  and  every  buyer  feels  the  market 
should  decline ;  he  talks  as  if  no  life  were  in  the  mar- 
ket ;  the  papers  are  full  of  such  statements  as  ' '  heavy 


Buying  Spot  Cotton  123 

receipts/'  '^stagnant  trade/'  '^glutted  market/'  ^'la- 
bor troubles/'  ''financial  disturbances/'  etc.,  the  very- 
fact  of  such  agitation  conduces  to  declines — and  the 
market  does  decline.  The  sentiment  to  ''go  short/' 
is  not  only  state- wide,  but  covers  the  entire  South, 
even  spreading  to  foreign  commercial  centers,  and 
when  so  universal,  the  power  of  the  great  Cotton  Ex- 
changes can  not  with  all  its  force  revert  the  tide  of 
sales  overwhelming  the  market  and  .irresistably  forc- 
ing it  down. 

The  statement  here  drawn,  is  so  clearly  set  forth 
that  the  line  of  demarcation  between  a  possibility 
and  an  actuality  is  unmistakable — the  actual  condi- 
tions set  forth  are  self-evident,  namely,  the  crop  is 
large,  demand  is  light,  receipts  heavy,  all  of  which 
induce  short  selling. 

This  condition  prevailed,  notably  m  the  year  1894, 
and  the  years  1897-8,  to  which  the  author  bears  wit- 
ness as  he  was  actively  engaged  in  cotton  buying  in 
these  years,  more  particularly  the  latter  two,  as  being 
the  first  in  which  he  learned  the  value  (for  the  buyer) 
of  short  sales;  the  whole  South  "went  short"  and 
every  effort  put  forth  by  the  Exchanges  to  advance 
the  market,  was  met  with  such  a  flood  of  offerings  as  to 
effectually  prevent  any  advance ;  spot  buyers  were  just 
as  anxious  to  see  reactionary  advances  as  any  one,  but 
only  to  get  a  better  base  on  which  to  sell,  and  sell  they 
did.  Thousands  did  not  wait  for  any  advance;  as 
fast  as  their  forward  sales  were  completed  by  the  de- 
livery of  cotton  on  them,  others  of  like  nature  followed 
repeatedly  for  two  and  three  months  in  succession 
during  gathering  time. 

When  the  buying  element  at  all  the  local  points  in 


124  The  American  Cotton  System 

the  South,  operating  intuitively  as  one  interest,  and 
that  too,  in  line  with  the  large  firms,  the  direct  effect 
upon  the  market  is  doubly  forceful,  backed  with  large 
crops  and  heavy  receipts,  short  selling  follows  to 
the  detriment  of  the  grower,  and  a  loss  to  the  cotton 
belt  of  millions  of  dollars. 

At  such  periods  when  extensive  short  sales  are  be- 
ing consummated  everywhere,  the  spot  buyers  are  not 
the  exclusive  factors  contributing  to  declines,  but,  the 
consumers  who  spin  and  weave  the  raw  material  into 
finished  products  who  are  ever  alert  for  such  events 
to  transpire,  adroitly  keep  out  of  the  market  or  buy 
only  on  concessions,  adding  a  further  weight  to  the 
market  and  a  bar  to  any  advance. 

The  basis  for  this  action  is  the  purported  large  out- 
put expected  from  the  farmers'  fields;  they  who  are 
ever  anxious  to  realize  adequate  returns  on  their  labor 
and  should  get  good  results,  are  the  originators  of  a 
force  within  themselves,  the  which  being  augmenta- 
tive to  that  of  the  short  seller,  non-activity  of  the 
consumer  and  exchange  manipulator,  constitutes  a 
third  factor  operating  against  themselves  as  to  any 
advance  in  the  market. 

Were  it  possible  through  association  that  the  cot- 
ton growers  could  so  unify  their  actions  as  to  so 
effectively  gauge  the  cotton  yield  annually  to  an 
amount  exactly  adequate  to  the  demand,  a  consumma- 
tion of  their  hopes  could  be  materially  realized,  and 
prices  consonant  to  their  every  wish  would  be  a  felici- 
tous result;  such  co-operation  would  practically  de- 
stroy any  source  for  short  selling  and  permanently 
eliminate  such  factors  from  the  market. 

The  very  fact  of  the  farmer  making  a  large  or  small 


Buying  Spot  Cotton  125 

crop,  is  a  point  of  consideration  equally  interesting  to 
all  in  any  way  connected  with  the  cotton  trade;  to 
him  all  interests  look  for  information  on  this  subject 
that  will  give  them  a  probable  guide  to  any  specu- 
lative intentions. 

When  it  is  seen  that  the  acreage  has  been  materially 
increased,  the  seasons  appropriate,  it  is  logically  con- 
ceded that  the  yield  will  be  good  if  not  large,  and 
trading  in  the  staple  seeks  the  short  side  of  the  mar- 
ket; the  farmer  being  in  such  instances  the  primary 
cause  for  manipulative  action  on  the  short  side,  and 
a  bar  to  his  own  interests.  Inversely,  when  the 
acreage  has  been  so  reduced  to  such  a  percentage  as 
to  affect  the  probable  output  to  an  appreciable  ex- 
tent, the  inclinations  of  the  most  arrogant  bear  to 
invade  the  market  as  a  short  seller  are  largely  held 
in  abeyance  for  fear  of  an  adverse  element  that  might 
be  injected  into  the  market  and  prevent  any  decline, 
produce  stability,  or  create  an  advance,  all  of  which 
would  reflect  against  him  in  attempting  to  throw  the 
market  down  by  short  selling. 

Operators  dealing  extensively  in  the  cotton  trade, 
and  who  will,  perhaps,,  at  times  sell  the  market  short 
several  thousand  bales,  in  order  to  secure  their  re- 
quirements, frequently  offer  encouragement  to  their 
representatives  at  interior  points  in  contributory  ter- 
ritory, who  in  turn  sell  short,  and  in  this  way  the 
large  dealer  secures  his  commitments  secondarily 
without  seeking  protection  through  a  contract  from 
some  of  the  Cotton  Exchanges. 

When  farmers  are  offering  their  cotton  freely  to 
local  buyers;  when  the  markets  are  being  flooded 
with  heavy  receipts  faster  than  the  trade  can  absorb 


126  The  American  Ootton  System 

tjiem,  it  is  quite  an  easy  matter  to  make  short  sales 
with  almost  an  assured  confidence  that  they  can  be 
easily  satisfied,  with  but  little  risk  to  those  operating ; 
and  here  again  it  might  be  emphasized,  the  grower 
accelerates  the  decline,  contributing  by  his  actions  ef- 
fective influences  that  induce  lower  prices. 

Now,  while  information  relative  to  the  acreage  might 
be  satisfactory  to  the  trade,  climatic  influences  af- 
fect more  or  less  the  finality  of  the  cotton  yield,  the 
sentiment  respecting  the  ultimate  out-put,  is  not  the 
same  with  all  dealers,  and  upon  this  sentiment  diverse 
ideas  emanate;  some  believing  the  market  will  go  up, 
some  think  it  will  go  down,  and  to  attempt  short 
sales  at  such  moments  invite  speculation  of  doubtful 
results. 

Those  who  would  attempt  to  short  sell  under  such 
information,  often  find  the  market  advances  against 
them,  when  their  efforts  to  buy  further,  stimulate  de- 
mand, and  indirectly,  the  short  seller  gets  ''caught" 
in  bulling  the  market  against  himself. 

ARGUMENTS  FAVORING  SHORT  SELLING  CRITICISED. 

It  is  argued  by  some  leading  members  of  the  Cot- 
ton Exchanges  that  short  selling  is  a  stimulant  to 
trade  and  really  conduces  to  better  prices,  on  the 
ground  that  those  who  sell  short  must  buy  again  to 
fill  the  orders,  and  this  secondary  purchasing  being 
among  competitors,  adds  such  a  stimulus  to  the  trade 
as  to  cause  advances  and  good  prices  to  the  grower. 

If  such  reasoning  were  truly  logical,  the  conclu- 
sions would  be  drawn  that  those  selling  short  would 
expect  to  pay  more  for  their  purchases  than  the  prices 


Buying  Spot  Cotton  127 

obtained  in  the  sale,  and  a  consequent  loss  in  the 
transaction,  if  so,  one  would  reasonably  conclude  that 
short  selling  induced  losses  to  the  operators. 

No  conservative  dealer  would  ever  sell  short  did  he 
not  expect  to  buy  at  a  less  figure  than  called  for  in 
the  sale,  for  to  a  future  depressed  market  he  looks  for 
his  gains,  and  not  elsewhere,  and  the  lower  the  market 
declines  before  he  buys,  the  greater  the  margin  to 
accrue  to  his  credit. 

It  is  not  usual  to  find  the  market  in  such  condition 
as  that  just  described,  and  when  not  so  clearly  set 
out  as  to  a  definite  yield,  to  attempt  to  bull  or  bear 
the  market  upon  an  uncertainty  necessarily  involves 
more  or  less  risk,  and  any  operator  speculating  at 
such  times  must  needs  be  subjected  to  a  hazard  not 
unlike  gambling. 

Indeed,  the  very  fact  of  the  existence  of  this  un- 
certainty is  a  contributing  cause  for  diverse  sentiment, 
and  it  is  argued  by  Exchange  members  that  the  prices 
for  our  cotton  are  founded  on  sentiment;  a  portion  of 
the  trade  believing  the  market  sufficiently  high  to 
justify  maintaining  at  such  a  point,  on  which  short 
sales  may  be  made,  while  the  other  portion  think 
causes  exist  sufficient  to  call  for  an  advance,  and  these 
diverse  ideas  contribute  to  a  stable  market — in  other 
words,  diverse  sentiment  create  bulls  and  bears,  the 
two  opposing  forces  of  which  when  about  evenly  di- 
vided, give  stability — ^but  should  the  bears  prepon- 
derate as  to  numbers  or  influence,  the  market  can  be 
driven  to  lower  levels;  should  the  bulls  be  in  the 
ascendency  the  market  is  taken  in  their  hands  and 
prices  made  to  advance. 

This  argument  is  directly  applicable  to  members  of 


128  The  American  Cotton  System 

the  Cotton  Exchanges,  but  should  apply  equally  well 
to  spot  dealers  in  the  South,  who,  while  not  so  aligned 
in  unified  organization,  their  actions  based  on  uni- 
versal ideas  as  to  the  large  or  short  crop,  govern  them 
in  their  operations;  if  the  spot  buyers  believe  condi- 
tions exist  giving  sufficient  evidence  of  an  advance  in 
the  market,  they  will  buy  cotton  with  avidity  and 
hold  for  higher  quotations,  which  operations  when 
South-wide  stimulate  prices,  and  give  as  good  results 
as  if  the  market  were  manipulated  by  any  other 
agency. 

To  *^ short  the  market^'  in  the  absence  of  any 
definite  information,  is  equivalent  to  guessing  at  re- 
sults; if  the  guesser  guesses  right,  he  wins,  if  not,  he 
loses,  and  the  fact  of  such  operations  by  dealers  cre- 
ate in  the  market  two  character  of  buyers;  one  who 
can  buy  all  cotton  offered  if  desired,  and  the  other 
who  is  virtually  out  of  the  market. 

Let  it  be  stated  that  T.  L.  Williams  at  Union  City, 
Ga.,  sells  500  bales  short  at  10  cents,  and  Tom  Jones 
does  not  ''short  the  market";  suppose  the  market 
declines  to  9.80  before  any  reaction;  it  is  apparent 
that  Williams  has  the  advantage  of  the  Union  City 
market,  because  he  has  cotton  sold  at  10  cents;  as- 
suming a  grower  offers  5  B/C  on  the  market;  Jones 
offers  9.75,  for  9.80  is  all  he  can  get  for  it  at  the  time, 
now,  as  Williams  can  get  10  cents,  he  can  buy  every 
bale  of  cotton  offered  up  to  500  on  such  a  market 
and  Jones  can  not  compete  with  him;  should  Jones 
wish  to  make  Williams  ''pay  all  its  worth,"  he  could 
bid  9.80  and  force  Williams  to  pay  9.821/2  or  9.85, 
either  of  which  figure  would  be  at  a  loss  to  Jones  and 
a  gain  to  Williams. 


Buying  Spot  Cotton  129 

This  in  practice,  frequently  occurs  in  all  Southern 
markets  during  the  season,  and  makes  clear  to  the 
farmer  not  fully  conversant  with  such  facts  why  some 
buyers  pay  more  for  cotton  than  others. 

Buyers  in  some  towns  will  all  sell  short,  while  those 
in  adjacent  ones  fail  to  do  so,  then  if  the  market  de- 
clines, those  having  ''shorted"  the  market  are  in  the 
ascendency,  and  this  town  by  reason  of  its  action  has 
placed  itself  in  position  to  offer  more  than  its  com- 
petitors, and  such  a  town  is  accredited  with  being  a 
better  cotton  market  than  others  in  the  same  terri- 
tory, and  vice  versa. 

Were  the  market  to  advance  against  these  "short 
sellers,"  they  would  be  ''on  the  wrong  side  of  the 
market, '  ^  and  their  competitors  the  gainers  in  the  end. 
This  does  not  argue  that  the  short  seller  would  not 
buy  cotton,  not  by  any  means,  in  fact  he  would  be 
the  more  active  buyer  of  the  two,  as  every  point  ad- 
vance against  him  is  just  so  much  loss,  and  to  secure 
his  requirements  as  early  as  possible  and  minimize 
this  loss  stimulates  him  to  offer  "above  the  market" 
to  fill  his  contract,  and,  perhaps,  again  have  the  credit 
of  being  the  best  buyer — such  short  sales  are  always 
kept  from  the  public ;  the  grower  left  to  form  his  own 
assumptions. 

Now,  again,  local  buyers  operating  in  a  market  the 
tendency  of  which  is  to  advance;  frequently  subject 
themselves  to  a  keen  competition;  buying  at  times 
becoming  so  active  that  the  market  is  practically  lost 
sight  of,  and  prices  purely  arbitrary  offered  the  grow- 
ers. This,  however,  is  a  rare  exception  and  not  the 
rule  for  such  a  character  of  business  prosecuted  upon 
only  probable  advances  are  just  as  likely  to  result  in 


130  The  American  Cotton  System 

a  loss  as  a  gain,  for  which  reasons  the  buying  fra- 
ternity offers  little  encouragement  for  a  continuation 
of  the  practice. 

This  is  arguing  from  the  stand-point  of  the  present 
cotton  system  of  marketing  cotton,  under  the  guid- 
ance or  auspices  of  the  Cotton  Exchanges. 

The  American  Cotton  System  as  set  forth  in  the 
preceding  chapters  is  one  founded  on  practical  ex- 
perience of  something  like  half  a  century,  and  from 
its  inception  to  the  present  day  it  has  been  and  still 
is  in  an  everchanging  state ;  each  siTcceeding  year  wit- 
nessing some  change  of  more  or  less  importance  in 
the  system  principally  shown  in  amendment  of  rules 
pertaining  to  the  Cotton  Exchanges,  delivering  on 
spinner  orders  especially  for  foreign  delivery. 

Until  very  recently  cotton  billed  for  foreign  ports, 
could  be  sold  with  guarantee  following  shipments 
covering  quality  and  weights,  but  owing  to  so  much 
friction  having  resulted  in  securing  reclamations  on 
this  side,  the  European  trade  has  demanded  and  still 
holds  to  the  practice  of  requiring  operators  here  to 
have  representatives  there  backed  with  financial  re- 
sources and  authority  to, adjust  claims  and  depend  no 
more  on  attempted  adjustments  in  America. 

cotton  wrappings. 

Evidently  the  primary  motive  for  wrapping  the  cot- 
ton of  the  South  in  jute  material  was  from  the  fact 
of  its  first  use  being  regarded  as  an  economical  idea; 
the  jute  being  recognized  as  a  cheaper  wrapping  than 
the  substance  to  be  protected,  and  from  the  days  of 
its  inception,  its  popularity  has  given  it  dominance 


Buying  Spot  Cotton  131 

over  all  other  materials,  despite  the  fact  of  its  offer- 
ing poor  protection  to  the  cotton  wrapped. 

The  fact  of  its  being  woven  so  loosely,  the  fibers  of 
the  cotton  wrapped  easily  protrude,  offering  inviting 
sources  for  fire,  and  a  demand  for  higher  rates  of  fire 
insurance. 

This  material  offers  but  little  resistance  to  dirt,  soot, 
or  smoke,  and  absolutely  none  to  moisture. 

Some  brands  of  jute  bagging  have  been  treated  to 
an  application  of  some  substance  to  render  it  re- 
sistant to  fire,  but  were  it  made  absolutely  so  it  does 
not  by  this  reason  give  perfect  protection  to  the 
cotton  enclosed  in  it,  because  of  the  fact  of  its  loose 
construction. 

The  application  of  jute  bagging  to  cotton  is  direct- 
ed more  especially  to  its  use  for  covering  square  bales, 
such  being  large  and  heavy,  can  not  be  well  handled 
without  the  use  of  steel  hooks,  which  when  used  of- 
ten tear  the  bagging  badly. 

It  should  be  remembered  as  stated  elsewhere  in  this 
work,  how  buyers  cut  the  bagging  on  cotton  when  first 
purchased  from  the  growers'  hands;  how  subsequent 
buyers  do  the  same  thing,  but  cut  in  a  different  place 
and  these  cuts,  often  four  and  five,  being  made  at  a 
different  place  each  time,  taken  in  connection  with 
the  mutilation  given  with  the  hooks,  virtually  destroys 
the  utility  of  the  bagging  and  leaves  it  in  a  very  ragged 
condition  when  arriving  at  the  compress  or  destina- 
tion. 

Bales  so  mutilated  are  patched  at  the  compress,  and 
for  each  and  every  one  put  on,  additional  charges  are 
entered  against  the  bale. 
•    Prom  the  first  purchase  of  cotton  to  its  final  destina- 


132  The  American  Cotton  System 

tion,  it  many  times  passes  through  the  hands  of  from 
three  to  five  different  ones,  each  time  weighed,  sam- 
pled and  insured,  each  time  sampled  it  loses  the  weight 
of  the  sample  and  its  value;  each  time  weighed  a 
charge  is  made;  each  time  insured  an  additional  ex- 
pense. 

It  is  quite  evident  then  from  the  nature  of  such 
a  system  of  handling  cotton,  it  is  necessarily  a  very 
expensive  one,  and  all  such  charges  being  taxed  up 
against  the  cotton  are  calculated  as  charges  to  be  de- 
ducted when  the  purchase  price  is  made  for 
the  grower,  and  on  him  these  charges  fall. 

The  weight  of  loosely  woven  jute  bagging  surround- 
ing a  bale  of  cotton  is  twelve  to  fourteen  pounds,  and 
the  six  ties,  ten  pounds,  making  about  twenty-two 
to  twenty-four  pounds  on  each  square  bale  on  which 
freight  must  be  paid  in  its  transportation,  and  for 
which  weight  no  mill  pays,  for  such  tare  is  figured  off 
when  prices  are  made  for  cotton  bought. 

The  fact  of  an  arbitrary  tare  of  6  per  cent  being 
deducted  from  the  weight  of  cotton  sold  for  foreign 
account,  proves  quite  expensive  to  the  farmer,  be- 
cause such  a  percentage  on  a  500-pound  bale  proves 
excessive. 

Estimating  the  weight  of  bagging  and  ties  to  be 
24  pounds  to  the  bale,  and  say  a  bale  weighs  500 
pounds,  6  per  cent  of  which  would  equal  30  pounds, 
thus  taking  from  such  a  bale  an  excess  of  6  pounds, 
falls  as  a  loss  to  the  producer,  and  the  larger  the 
I  bale  the  greater  the  loss,  relatively,  to  him. 
'•I  Now,  jute  bagging  having  no  practical  value  after 
being  used  is  sold  as  **old  junk''  for  about  one-half 
cent  a  pound,  while  the  steel  ties  are  dumped  to  the 


Buying  Spot  Cotton  133 

iron  trade  as  old  metal  for  a  nominal  sum  of  one 
quarter  cent  a  pound,  usually,  returning  but  little 
credit  for  the  original  costly  wrapping. 

All  cotton  to  go  out  on  long  railway  hauls,  or  for 
ocean  steamer  is  compressed  before  shipment,  and 
when  so  prepared  is  patched  to  cover  the  cuts  in  the 
bagging. 

Compressing  cotton  reduces  the  compressed  bales  to 
about  one-third  their  original  size,  resulting  in  secur- 
ing two-thirds  more  space  in  transportation  equip- 
ment. 

Cotton  treated  to  patches  at  the  compress,  and  pre- 
pared for  its  long  haul,  one  would  think  it  should 
arrive  at  destination  in  good,  or  at  least,  fair  condi- 
tion, but  for  the  facts,  let  us  look  into  some  of  the 
reports  of  our  consuls  at  the  foreign  commercial  and 
manufacturing  centers. 

CONSULAR    REPORTS. 

Mr.  J.  Edward  Nettles,  consul  to  Austria-Hungary, 
in  his  report  for  May,  1895,  said  in  substance :  Amer- 
ican cotton  received  at  Trieste,  suffered  in  comparison 
with  foreign  cotton,  both  on  account  of  the  style  or 
manner  of  covering,  and  the  extent  of  compressing. 

The  covering  was  torn,  the  hoops  off  and  the  cotton 
liable  to  loss  from  mud,  dust,  theft  and  handling. 
The  marks  are  well-nigh  invisible  on  the  covering,  and 
great  trouble  and  confusion  arises  therefrom.  The 
bales  vary  in  size,  which  adds  to  the  expense,  in  pre- 
venting compact  and  close  storage.  The  loss  in  weight 
is  about  one  per  cent  in  excess  of  other  cotton,  and 
that  with  increased  freight  and  other  expenses,  gives 
about  three  per  cent  advantage  to  foreign  cotton. 


134  The  American  Cotton  System 

Consul  C.  W.  Chancellor  of  Havre,  and  Consul  C. 
M.  Thomas  of  Marseilles,  made  similar  statements: 
' '  The  merchants  of  Marseilles  gave  it  as  their  opinion 
that  the  ideal  bale  should  be  about  350  to  400  pounds 
in  weight. ' ' 

Consul  Hugo  M.  Starkloff,  stated  American  cotton 
suffered  excessive  tare  In  the  Bremen  market.  Sub- 
stantially he  said:  The  wrapping  of  a  cotton  bale 
has  frequently  been  weighed  and  found  to  weigh  up 
to  57  pounds  without  the  bands,  notwithstanding  the 
amount  of  covering  used,  it  was  of  the  poorest  quality, 
and  consisted  many  times  of  old  linen,  old  coffee  bags, 
or  materials  of  similar  construction  which  were  easily 
torn  on  first  handling. 

Consul  J.  C.  Managhan  at  Chemnitz,  stated  the 
Austrian  Spinners'  Union,  the  Bremen  Cotton  Ex- 
change, the  Spinners  of  Saxony,  Southern  Germany 
and  Bavaria  had  held  meetings  and  were  unanimous- 
ly of  the  opinion  that  American  cotton  growers  should 
be  asked  to  use  a  heavy  cotton  covering  as  a  substi- 
tute for  jute.  It  was  stated  a  cotton  covering  could 
be  used  for  many  purposes  after  being  taken  from 
the  bale,  while  the  present  covering  of  jute  was  of 
no  practical  value  after  serving  its  purpose.  It  was 
proposed  to  order  from  those  using  cotton  covering. 

The  author  is  unacquainted  with  any  efforts  on  the 
part  of  such  organizations  to  demand  from  American 
growers  or  dealers  cotton  so  wrapped. 

Consul  James  E.  Neal,  in  Liverpool,  condemned 
very  severely  the  principle  of  screwing  bales  into  the 
holds  of  vessels,  and  cutting  off  the  ends  to  make  them 
fit  snugly.  In  such  a  manner  a  great  deal  of  cotton 
is  lost,  as  when  the  ships  are  being  unloaded  this  falls 


Buying  Spot  Cotton  135 

about  the  holds  and  quays,  making  it  unfit  to  be  placed 
back  in  the  bales,  and  must  necessarily  be  sold  at 
greatly  reduced  price.  From  ten  vessels  unloaded,  he 
stated,  from  the  reports  of  the  inspectors  on  the 
rough  and  broken  cargoes,  in  the  ten  vessels,  it  was 
found  that  foreign  consignees  in  Liverpool  had  to  re- 
ceive all  the  way  from  five  to  ten  bales  to  make  up  for 
the  loss  on  the  broken  ones.  Such  state  of  things  re- 
sults in  heavy  claims  for  loss  of  weight,  which  falls 
on  the  American  shipper. 

Mr.  Neal  further  stated  that  most  American  cotton 
bales  are  landed  in  a  very  ragged  condition,  with  the 
cotton  much  exposed,  and  either  because  of  the  poor 
material  of  the  iron  bands,  and  especially  the  ties  (the 
author  thinks  he  refers  to  the  buckles  on  the  ties), 
or  because  of  the  extremely  rough  treatment  on  the 
railways  or  steamships,  great  numbers  of  bales  are 
landed  with  several  bands  missing.  In  consequence  of 
the  bands  being  removed,  the  bales  have  expand:  d  and 
burst  the  covering,  the  cotton  in  the  loose  part  of  the 
bale  merely  holding  together  by  its  own  tenacity. 
Sometimes  the  bales  are  completely  broken  up  and 
landed  in  bulk. 

Cotton  landed  at  the  Spanish  ports,  according  to 
Consul  Herbert  W.  Bowen,  stationed  at  Barcelona, 
shows  to  be  in  about  such  condition  as  that  landed 
at  other  foreign  ports.  '^It  is  not  an  uncom- 
mon thing,''  he  said,  ''to  see  a  bale  broken  in  two, 
or  others  with  one  or  two  hoops  off  and  the  end  of  the 
bale  looks  like  a  cauliflower. ' ' 

''Pilfering  of  our  cotton   is  almost  reduced   to   a 

%  trade — women  and  boys  hovering  around  a  bale  like 

flies  around  honey.     In  short,  all  except  the  brokers 


136  The  American  Cotton  System 

agree  that  the  United  States  cotton  does  not  arrive 
in  proper  condition,  and  they  do  not  hesitate  to  as- 
sert they  would  buy  more  American  cotton  than  they 
do,  if  it  were  deliverable  as  it  should  be. ' ' 

While  these  extracts  are  taken  from  old  consular 
reports,  evidences  of  more  recent  nature  show  that 
our  cotton,  to  a  large  per  centage,  is  still  landed  in  a 
very  dilapidated  condition. 

The  charge  is  made  by  foreign  consignees  that  the 
reason  for  so  much  cotton  being  delivered  in  bad  form 
is  because  mainly  of  the  character  of  the  wrapping 
used  and  the  form  of  the  package. 

The  price  that  should  be  paid  the  grower  for  his 
cotton,  should  be  that  received  at  the  mills,  less  the 
expense  of  getting  it  there,  and  the  fewer  the  inter- 
ventions the  less  intermediate  charges,  and  how  to 
eliminate  all  imnecessary  intervention  is  the  problem 
to  be  solved. 

It  is  not  the  purpose  of  this  volume  to  attempt  to 
formulate  a  new  system  or  plan  for  marketing  cot- 
ton, but  to  give  the  prevailing  system  as  it  exists 
today. 

The  author  believes  the  present  system  can  not  be 
improved  by  any  one,  or  by  any  corporate  body,  un- 
less this  body  is  fully  conversant  with  all  the  details 
connected  with  it,  and  to  acquaint  the  public  with  such 
information  and  details  is  the  object  designed  by  this 
work. 

Now,  when  the  allegation  is  made  by  foreign  cotton 
interests  that  the  use  of  jute  bagging  is  the  cause  for 
so  much  cotton  being  delivered  in  bad  condition,  the 
inference  is  that  some  other  material  for  a  covering 
and  a  different  form  of  package  should  be  used. 


Buying  Spot  Cotton        ,  137 

It  is  evident,  if  a  lighter  material  is  used  for  wrap- 
ping and  the  use  of  the  ties  abandoned,  the  wrapping 
will  be  lighter  in  weight  and  the  cause  for  excessive 
tare  removed. 

To  overcome  these  obstacles,  a  few  years  since,  ef- 
forts were  made  to  change  the  form  of  the  bale  from 
square  to  round,  which  was  done,  and  with  no  other 
covering  than  the  heavy  cotton  cloth  enveloping  it. 

To  make  this  form  of  bale  capitalists  invested  heav- 
ily in  such  an  enterprise,  and  exerted  themselves  to 
introduce  a  round  bale  to  the  trade,  but  owing  to  the 
fact  of  popular  prejudice  being  aroused  against  its 
general  use,  the  undertaking  was  abandoned  to  a  large 
extent,  but  private  interests  are  again  making  efforts 
to  re-introduce  it  with  possibly  some  improvements 
over  the  original  form  introduced. 

If  this  form  of  bale  will  admit  of  a  covering  the 
weight  of  which  will  be  reduced  one-half  or  twelve 
pounds,  this  amount  of  tare  should  accrue  to  the  credit 
of  the  grower,  who  is  now  actively  engaged  in  trying 
to  stimulate  the  idea  to  have  all  forms  of  cotton  wrap- 
ped in  cotton  material,  whether  the  bale  be  round  or 
square. 

Such  ideas  should  be  encouraged. 


CHAPTER  V. 
ARITHMETIC  OF  COTTON. 

No  deviation  from  the  characteristic  signs  or- 
dinarily used  in  arithmetic  will  be  made  in  this  work. 

The  usual  signs  expressive  of  the  fundamental  prin- 
ciples of  addition,  subtraction,  multiplication  and 
division  will  be  used. 

For  addition  the  plus  sign  +. 

For  subtraction  the  minus  sign  — . 

For  multiplication  the  sign  X. 

For  division  the  sign  ^-. 

For  equal  or  equally,  the  sign  of  parallel  bars  =. 

The  sign  plus  (  +  )  when  placed  between  two  or 
more  numbers  show  that  they  are  to  be  added. 

The  minus  sign  ( — )  shows  that  the  number  on  the 
right  is  to  be  taken  from  the  number  on  the  left. 

The  ex  (X)  or  multiplication  sign  when  placed 
between  two  or  more  numbers  indicates  they  are  all 
to  be  multiplied  together,  and  are  read,  multiplied 
by,  as  6X3,  is  read,  six  multiplied  by  three,  or  six 
times  three,  and  5X3X4,  is  read,  five  multiplied  by 
three  midtiplied  by  four. 

Only  one  sign  of  division  is  expressed  herein,  the 
bar  with  a  dot  above  and  below  (-f-)  and  shows  that 
the  number  on  the  left  is  to  be  divided  by  the  number 
on  the  right;  as  12^-3,  is  read,  twelve  divided  by 
three. 

The  sign  of  equality  (=)  is  read  equals  equals  or 
equal  to,  5X3=15,  is  read;  five  multiplied  by  three 
equals  fifteen,  or  is  equal  to  fifteen. 


Arithmetic  of  Cotton  139 

The  New  York  and  New  Orleans  Cotton  Exchanges 
having  established  the  rule,  that  all  cotton  calculations 
for  all  cotton  dealt  in  by  them  shall  be  made  in  cents 
and  decimal  fractions  of  a  cent,  and  that  no  transac- 
tion involving  the  use  of  a  decimal  fraction  less  than 
one-hundredth  (1/100)  of  a  cent  for  each  pound  of 
cotton  should  be  allowed,  and  the  introduction  of  this 
particular  form  of  decimal  fraction  has  given  rise  to 
the  use  of  the  same  designated  as  a  '* Point.'' 

The  ^ '  point, ' '  therefore,  will  have  a  conspicuous 
place  in  this  work. 

A  point  being  one  one-hundredth  (yiiy)  of  a  cent, 
and  a  cent,  one  one-hundredth  (rK)  of  a  dollar, 
then  one  ^^ point"  is  one  ten-thousandth  (ti^tot)  of 
a  dollar,  which  expressed  decimally  is,  .0001  of  a  dol- 
lar and  calls  for  use  of  the  decimal  fraction. 

The  ' '  point ' '  requiring  the  use  of  the  decimal  frac- 
tion to  the  fourth  place,  to  understand  its  full  mean- 
ing, and  to  elucidate  it,  will  be  necessary  to  examine 
the  decimal  fraction  in  its  bearing  on  numbers. 

DECIMAL   FRACTIONS. 

A  decimal  fraction  is  one  whose  denominator  is  10 
or  some  multiple  of  10,  but  its  numerator  may  be 
any  number.  It  decreases  in  value  from  left  to  right 
on  a  tV  scale,  or  increases  from  right  to  left  in  a 
10-fold  way. 

The  denominator  of  a  decimal  is  not  expressed  as 
one  in  a  common  fraction. 

The  period,  decimal  point  (.)  and  naughts  or  ci- 
phers are  essential  to  the  construction  of  decimals. 

Decimal  fractions  can  be  expressed  as  common  frac 


140  The  American  Cotton  System 

tions  and  common  fractions  as  decimals  when  the  de- 
nominator of  a  common  fraction  is  10  or  some  mul- 
tiple of  it. 

To  express  the  fraction  yV  as  a  decimal  the  figure 
1  is  used  with  a  dot  in  front  of  it,  thus,  .1 ;  if  it  be 
made  to  read  xiir?  it  is  made  this  way,  .01. 

A  naught  on  the  right  side  of  a  decimal  figure  adds 
no  value  to  it,  yet,  for  convenience,  in  adding,  sub- 
tracting or  dividing  decimals  it  is  often  used. 

-A^  tW  is  TO  of  iV,  and  a  naught  on  the  right 
of  the  decimal  adds  nothing  to  its  value,  the  naught 
is  placed  to  the  left  of  the  1  with  the  period  (decimal 
point)  prefixed,  indicating  ^  less. 

Common  fractions:  ^,  yw,  Tm,  Tuiiinr,  nrinm^. 

1000000- 

Decimals:  .1,  .01,  .001,  .0001,  .00001,  .000001. 

These  numbers  are  one-tenth,  one  one-hundredth, 
one  one-thousandth,  one  ten-thousandth,  one  one-hun- 
dred thousandth  and  one  one-millionth,  shown  both 
as  common  fractions  and  decimals. 

Note  that  the  number  of  figures  in  the  decimals  is 
one  less  than  the  number  in  the  denominator  of  the 
common  fraction. 

All  decimals  in  the  order  of  tenths  have  only  one 
figure;  hundredths,  two  figures;  thousandths,  three 
figures;  ten-thousandths,  four  figures;  one  hundred- 
thousandths,  five  figures,  and  millionths,  six  figures, 
with  the  decimal  point  in  front  of  them — prefixed  at 
the  left  of  the  numbers. 

The  relative  value  of  whole  numbers  and  decimals 
may  be  compared  in  this  way: 

1000=one  thousand. 
100=one  hundred. 


Arithmetic  of  Cotton  141 

10=ten. 
l=one. 
.l=one-tent]i. 
.01=one  one-hundredth. 
.001=one  one-thousandth. 

From  the  1  up,  the  numbers  increase  ten  times  each 
multiplication;  from  the  1  down,  they  decrease  one- 
tenth  each  multiplication,  that  is,  10  is  ten  times  one ; 
one  hundred  is  10  times  ten,  etc.,  while  one-tenth  is 
yV  of  1;  one-hundredth  is  t-W  of  1>  etc. 

DECIMAL  COMPARISONS. 

Tenths. 
.1 
.2 
.3 
.4 
.5 
.6 
.7 
.8 
.9 

If  written  thus:  10  and  call  it  10-tenths,  is  equal 
to  the  fraction  \%;  then  it  is  a  whole  number  and 
becomes  1. 

If  the  number  10  is  used  to  express  10-tenths  it 
can  not  be  expressed  decimally. 

When  desired  to  show  its  value  in  a  decimal  form, 
it  is  written  1.0 — one  and  no  tenths. 

Whole  numbers  (integrals)  used  in  connection  with 
decimals,  are  separated  from  each  other  by  the  dot, 
and  called  mixed  decimals. 


Hundredths. 

Thousandths. 

.01 

..001 

.02 

.002 

.03 

.003 

.04 

.004 

.05 

.005 

.06 

.006 

.07 

.007 

.08 

.008 

.09 

.009 

142  The  American  Cotton  System 

1.1  =one  and  one-tenth. 
5.8     =five  and  eight-tenths. 

9.2  =nine  and  two-tenths. 

6.03  =six  and  three-one-hundredths. 
22.5     =twenty-two  and  five-tenths. 

100.01  =one  hundred  and  one  one-hundredth. 

3.001=three  and  one  one-thousandths. 
525.227=five   hundred   twenty-five    and   two   hun- 
dred twenty-seven  thousandths. 

decimal  addition. 
Adding  decimals,  tenths  must  be  over  tenths,  hun- 
dredths   over    hundredths,    thousandths    over    thou- 
sandth, etc. 

Add  these  numbers: 
2.7,  86.5,  27.03,  16.225,  4.886,  215.16. 
2.7 
86.5 
27.03 
16.225 
4.886 
215.16 


352.501 
The  sum  is  read,  three  hundred  fifty-two  and  five 
hundred  and  one  thousandths. 

Add  356.11,  106.106,  2.5262,  527.8008,  15.00012. 
356.11 
106.106 

2.5262 
527.8008 
15.00012 


1,007.54312 


Arithmetic  of  Cotton  143 

This  sum  is  one  thousand  and  seven,  and  fifty-four 
thousand  three  hundred  and  twelve  hundred  thou- 
sandths. 

Add   twenty-two    and   six-tenths,    four    and    nine- 
thousandths,   three   hundred  six   and  seventeen   ten- 
thousandths,  two  thousand  and  two-tenths,  three  hun- 
dred twenty-nine  and  forty-two  one-hundredths. 
22.6 
4.009 
306.017 
2,000.2 
329.42 


2,662.246 

The  answer  is  two  thousand  six  hundred  sixty-two 
and  two  hundred  forty-six  thousandths. 

Cotton  calculations  requiring  the  use  of  decimals 
almost  constantly,  the  use  of  cents,  mills  and  parts 
of  them  are  necessarily  involved. 

The  use  of  cents  as  parts  of  a  dollar  is  expressed 
decimally  with  two  figures — decimals. 

Table  1. 

1  cent    =  .01  (tto)  of  a  dollar. 

2  cents  =  .02  (yf^)   of  a  dollar. 

3  cents  =  .03  (y^)  of  a  dollar. 

4  cents  =  .04  (yto)  of  a  dollar. 

5  cents  =  .05  (xtTr)   of  a  dollar. 

6  cents  =  .06  (tK)   of  a  dollar. 

7  cents  =  .07  (rh)   of  a  dollar. 

8  cents  =  .08   (rlo)   of  a  dollar. 

9  cents  =  .09   (y^)  of  a  dollar. 
10  cents  =  .09   (fo\)   of  a  dollar. 


144  The  American  Cotton  System 

Mills  being  -^^  of  cents,  cents  being  y^q-^  of  dollars, 
then  mills  equal  rV  of  tw  of  dollars,  equal  3-^ 
(one  thousandth)  of  dollars  and  are  expressed  with 
three  decimals. 

Table  2. 


1  mill    =  .001 

(twtt)  of  a  dollar. 

2  mills  =  .002 

(tAjj)  of  a  dollar. 

3  mills  =  .003 

(i-ror)   of  a  dollar. 

4  mills  =  .004 

(two)  of  a  dollar. 

5  mills  =  .005 

(two)  of  a  dollar  =1^  cent. 

6  mills  =  .006 

(tAit)   of  a  dollar. 

7  mills  =  .007 

(ttW)  of  a  dollar. 

8  mills  =  .008 

(tA^)  of  a  dollar. 

9  mills  =  .009 

(tw^)  of  a  dollar. 

10  mills  =  .010 

(tw^)  of  a  dollar  =1  cent. 

100  mills  =  .100 

(twA)  of  a  dollar  =10cents. 

Add  thirty  dollars  and  nine  cents,  twenty  dollars 

and  two  cents,  five  dollars  and  ten  cents,  eighty  dol- 

lars and  twenty  cents,  one  dollar  and  one  cent,  one 

dollar  and  five  cents 

1,  six  dollars  and  three  cents,  six- 

teen  dollars  and  sixteen  cents. 

The  same  in  figures: 

$30.09 

20.02 

5.10 

80.20 

1.01 

1.05 

6.03 

16.16 

$159.66 


Arithmetic  of  Cotton  145 

The  total  is  one  hundred  fifty-nine  dollars  and  six- 
ty-six one-hundredths  of  a  dollar,  decimally. 

This  addition  shows  dollars  and  cents — whole  num- 
bers and  fractions,  constituting  mixed  numbers. 

To  add  mixed  numbers  or  decimals,  add  as  in 
whole  numbers,  care  being  taken  to  place  the  dots 
directly  over  each  other,  tens  over  tens,  hundreds  over 
hundreds,  etc.,  filling  blank  spaces  with  naughts  if 
desired,  and  place  the  dot  in  the  result  directly  un- 
der the  dots  above. 
Add: 

$-     27.16 

9.05 

160.003 

225.017 

9.22 

4,728.001 


$5,158,451 

The  same  with  naughts  filled  in  vacant  spaces : 

$      27.160 

9.050 

160.003 

225.017 

9.220 

4,728.001 


$5,158,451 

The  sum  may  be  expressed  as  $5,158.45^ —  five 
thousand  one  hundred  and  fifty-eight  dollars  and 
forty-five  and  one-tenth  cents — the  1  coming  in  mills 
place,  which  is  iV  of  a  cent. 


10 


146 


The  American  Cotton  System 


DECIMAL  subtraction. 

To  subtract  decimals,  the  same  rule  must  be  ob- 
served as  for  addition;  that  is,  tenths  under  tenths, 
hundredths  under  hundredths,  etc.,  keeping  the  lines 
even  by  filling  in  with  naughts.  Subtract  as  in  simple 
subtraction. 

Take  twenty  dollars  and  nine  cents  from  thirty- 
two  dollars  and  ten  cents. 
$32.10 
20.09 


$12.01 
The  10  cents  equal  yV  oi  a  dollar  and  as  a  deci- 
mal is  expressed  as  .1,  but  to  make  the  subtraction 
easy  the  naught  is  added  to  the  right. 


Table  3. 

$  .05 

(  5 

cents  )=j'o  of  a  dollar. 

.10 

(10 

cents  )^Ti;f of  a  dollar. 

.125 

(121/2 

cents)=|^of  a  dollar. 

.20 

(20 

cents)^iof  a  dollar. 

.25 

(25 

eents)^^of  a  dollar. 

.30 

(30 

cents  )=^i^(i0f  a  dollar. 

.375 

(371/2 

cents)^f  of  a  dollar. 

.40 

(40 

eents)=f  of  a  dollar. 

.50 

(50 

cents)=iof  a  dollar. 

.60 

(60 

cents)^fof  a  dollar. 

.625 

(621/2 

eents)=^|'of  a  dollar. 

.75 

(75 

cents)=f  of  a  dollar. 

.875 

(871/2 

cents)=|of  a  dollar. 

.90 

(90 

cents  )=TVf  a  dollar. 

By  the 

table 

add  $35f,  $61,%,  $8Vi, 

$51^. 

$116t%  and 


Ans.  $272.90. 


Arithmetic  of  Cotton  147 


Explanation : 

$  35f=$  35.40 

61 1^= 

61.90 

81/4= 

8.25 

116i\= 

116.30 

51V„= 

51.05 

Total  amount 

$272.90 

Add  $1161,  $58%,  $265^%,  $565 f\,  and  from  the 
sum  take  $92%. 


Ans. 

$912.80. 

Explanation : 

$1161=$    116.40  =$ 

116.400 

587/8      = 

=       58.875= 

58.875 

265  A= 

=     265.30  = 

265.300 

565  ,V 

=     565.10  = 

565.100 

$1,005,675    $1,005,675 

Subtract 

92.875 

Remainder  $    912.800 
By  Tables  2  and  3,  add  $150  and  1/2  cent,  $3283/8, 
$39  and  1  mill,  $437%,  $125  and  5  cents,  from  the 
sum  take  $800  twenty-two  and  14  cents. 
Explanation : 

$150+ V2cent=$    150.005   (Table  2) 

$3283/s=      328.375   (Table  3) 

$39+1  mill  =        39.001   (Table  2) 

$437%=      437.625  (Table  3) 

$125+5  cents  =      125.050  (Table  1) 


$1,080,056 
Less  $800+221/2  cents  =$    800.225   (Tables  2  and  3) 


$    279.831 


148  The  AmeriCxVN  Cotton  System 

Add  $1441-,  72%,  91/2,  2351/4,  42Vo. 

Ans.  $503,925. 

Add  one  dollar  one  mill,  63  dollars  and  6  cents, 

122  dollars   and  20  cents,  91  dollars  and  22  cents, 

1001  dollars  1  cent  and  2  mills,  36  dollars  and  sixty 

cents  and  6  mills. 

Ans.  $1,315,099. 
Add  $49i  $68%,  $126 1%,  $13^0. 

Ans.  $376,225. 
Add  $20^^  $991/2,  $2921^,  $634,  $6,042^   $111%. 

Ans.  $6,572,625. 
Add  $563/8,  $101-/0,  $6211/2,  $33 iV,  $75 1,  $1,000.- 
101/2. 

Ans.  $1,887.58. 

DECIMAL  SUBTRACTION. 

From  $9993/8  take  $271/2. 

Ans.  $971,875. 
From  $10,375i  take  $156y^o^. 

Ans.  $10,218.30. 
Add  $100,260%,  $1.044f,  $500  iV,  $221/2,  from  their 
sum  subtract  $99914. 
their  sum  subtract  $99914. 

Ans.  $100,828,625. 
Adding  and  subtracting  decimals  require  the  same 
process  as  adding  and  subtracting  simple  numbers, 
due  regard  being  had  for  the  location  of  the  deci- 
mal point  and  position  of  the  decimal  numbers. 

DECIMAL  MULTIPLICATION. 

To  multiply  decimal  fractions  requires  the  same 
operation  as  that  performed  in  multiplication  of  sim- 
ple numbers.  * 

There  must  be  as  manv  decimals  in  the  answer  as 


Arithmetic  of  Cotton  149 

are  in  both  multiplier  and  multiplicand  added  to- 
gether. 

Point  off  with  a  decimal  point  as  many  decimals 
in  the  answer  as  are  in  both  multiplier  and  multi- 
plicand, counting  from  the  right  towards  the  left. 

Should  the  multiplication  not  give  a  sufficient  num- 
ber of  decimals,  in  the  product,  prefix  naughts  to  the 
left  of  it  to  make  the  required  number. 

Multiply  two  and  tV  ^7  25  and  A. 

2.7X25.3= 

25.3 

2.7 


1771 
506 


68.31 
There  is  one  decimal  in  the  top,  and  one  in  the 
bottom  number  shown  here;  two  must  be  cut  off  in 
the  answer,  commencing  on  the  right  and  counting 
towards  the  left. 
Multiply  3.125  X50. 

3.125 
50 


156.250 
There  are  three  decimals  in  the  multiplicand  and 
none  in  the  multiplier — point  off  three  in  the  answer. 
Multiply    .005    (five    thousandths)    by    .8     (eight- 
tenths). 

.005 


.0040 


150  The  American  Cotton  System 

The  multiplication  here  gives  40  as  a  product,  but 
as  both  the  bottom  and  top  numbers  contain  four 
decimals  added  together,  four  must  be  shown  in  the 
answer  to  make  which  two  naughts  are  prefixed  to  the 
left  of  the  40,  the  answer,  then,  is  four  one-thou- 
sandths. 

Multiply  .25  by  50.64. 

50.64 
.25 


25320 
10128 


12.6600 
In  this  multiplication  the  two  naughts  in  the  prod- 
uct count  nothing  for  additional  value ;  the  answer 
will  then  read,  twelve  and  sixty-six  one-hundredths. 

Note. — Twenty-five  one-hundredths  of  anything  be- 
ing 1^  of  it,  the  same  result  will  be  obtained  by  divid- 
ing by  4 : 

4)50.64 


12.66 


DIVISION  OF  DECIMALS. 

To  find  the  quotient  (answer)  in  decimal  division 
requires  the  same  process  as  an  operation  in  division 
of  simple  or  whole  numbers. 

The  dividend  corresponding  to  the  product  in  mul- 
tiplication, must  contain  as  many  decimal  places  as 
are  shown  to  be  in  both  factors — divisor  a*nd  quotient. 

There  must  be  as  many  decimals  in  the  answer  as 
those  in  the  dividend  exceed  those  in  the  divisor. 


Arithmetic  of  Cotton  151 

Should  the  divisor  contain  more  decimals  than  the 
dividend,  annex  naughts  to  the  dividend  until  they 
equal  in  number  those  in  the  divisor ;  the  division  will 
be  performed  then  as  in  whole  numbers  with  no  deci- 
mals in  the  answer. 

1.     Divide  31.92  by   .42. 
Explanation : 

.42)31.92(76 
294 


252 
252 

There  being  an  equal  number  of  decimals  in  both 
divisor  (.42)  and  dividend  (.92)  they  cancel  each 
other  and  the  answer  is  a  whole  number. 

It  is  usual  in  practice  in  such  examples  to  take  out 
both  decimal  points  and  divide  as  in  whole  numbers. 
2.     Divide  319.2  by  .42. 
Explanation : 

.42)319.20(760 
294 


252 
252 


0 

In  this  division  only  one  decimal  appears  in  the 
dividend  (.2),  and  since  the  dividend  must  contain 
as  many  decimals  as  the  divisor,  a  naught  is  an- 
nexed to  the  .2,  making  it  now  .20  dVij),  the  operation 
performed  as  in  the  preceding  example  (1),  giving 
760  as  a  whole  number  for  an  answer. 

Note. — Adding  a  naught  to  the  .2,  adds  nothing 


152  The  American  Cotton  System 

in  value  to  it- — only  cyphers  annexed  as  decimals  to 
the   dividend,   facilitating  the   operation   of   division 
and  making  clear  the  character  of  the  answer. 
3.     Divide  3.192  by  .42. 
Explanation : 

.42)3.192(7.6 
294 


252 
252 
In  this  example  one  decimal  appears  in  the  answer. 
Note  there  are  three  decimals  in  the  dividend  (.192) 
and  two  in  the  divisor   (.42),  hence  the  number  in 
the  dividend  exceed  the  number  in  the  divisor  one; 
this  number  (1)  then  is  given  in  the  answer. 
4.     Divide  .3192  by  .42. 
Explanation : 

•.42).3192(.76 
294 


252 
252 

Pour   decimals   in   the   dividend    (.3192)    are   two 
more  than  in  the  divisor  (.42),  hence  two  decimals  are 
placed  in  the  answer. 
5.     Divide  3192  by  4.2. 
Explanation : 

4.2)3192.0(760 
294 

252 
252 

0 


Arithmetic  of  Cotton  153 

In  this  example,  as  in  No.  2,  the  same  result  is  ob- 
tained, namely,  760  whole  numbers.    The  divisor  (4.2) 
containing  one  decimal,  the  same  number  is  placed  in 
the  dividend  by  annexing  one  naught. 
6.     Divide  .03192  by  .42. 
Explanation : 

.42). 03192  (.076 
294 


252 
252 

Five  decimals  in  the  dividend  here  exceed  those  in 
the  divisor  by  two,  making  three  more  in  the  dividend, 
hence  three  decimals  must  be  in  the  answer,  and  as 
the  division  gave  only  76,  a  cipher  is  prefixed  to  the 
76,  making  .076  as  the  answer. 
7.  Divide  .03192  by  .042. 
Explanation : 

.042). 03192  (.76 
294 


252 
252 

Five  decimals  in  the  dividend  exceed  by  tivo  those 
in  the  divisor,  so,  two  decimals  are  placed  in  the 
answer. 

From  the  preceding  examples  a  general  rule  may  be 
formed  for  division  of  decimals.  / 

Rule. — Make  the  division  as  in  simple  numbers^ 
pointing  off  from  the  right  hand  side  of  the  answer  as 
many  places  for  decimals^  as  the  number  in  the  divi- 
dend exceeds  those  in  the  divisor;  should  the  answer 


154  The  American  Cotton  System 

not  show  so  many,  prefix  naughts  to  supply  the  de- 
ficiency. 

8.  Divide  .00034  by  1.7. 

Ans.  .0002. 

9.  Divide  40.36  by  .27. 

Explanation: 

.27 )  40.360000  ( 149.4814+ 

27 


133 

108 


256 
243 

130 

108 

220 
216 


40 

27 

130 
108 


22 

It  will  be  seen  that  the  two  decimals  in  the  dividend 
equal  those  in  the  divisor,  giving  from  the  division 
149  as  a  whole  number,  but  the  division  is  continued 
to  four  decimal  places  by  adding  naughts  until  car- 


Arithmetic  of  Cotton 


155 


ried  to  a  point  where  the  division  repeats  itself,  and 
will  never  end  evenly. 

In  operations  of  this  kind  the  division  may  be  ex- 
tended to  any  number  of  decimals  by  the  addition  of 
naughts  to  the  dividend. 

Reversing  the  operation  by  multiplication  gives  the 
proof. 

Table  of  Points. 


Table  4. 

1  point  equals  .0001  of  a  dollar 

2  points   ' 

'   .0002  "  ' 

3   " 

'   .0003  "  ' 

",  4   " 

'   .0004  "  ' 

5   " 

'   .0005  "  ' 

6   " 

'   .0006  "  ' 

7 

'   .0007  "  ' 

8   " 

'   .0008  "  ' 

9   " 

'   .0009  "  ' 

10   " 

'   .0010  "  ' 

20   " 

"   .0020  "  ' 

25   " 

"   .0025  "  ' 

50   " 

"   .0050  "  ' 

75   " 

"   .0075  "  ' 

100   " 

"   .0100  "  ' 

'  ==  1   cent 

250   " 

"   .0250  "  ' 

'  =  21/2  cents 

300   " 

"   .0300  "  ' 

'  ^  3   cents 

500   " 

"   .0500  "  ' 

'  =  5   cents 

1000   " 

"   .1000  "  ' 

'  ^10   cents 

Cotton  quotations  being  given  in  common  fractions, 
and  computations  being  more  readily  ascertained  by 
use  of  decimal  fractions,  the  following  table  is  given 
showing  their  relative  value : 


156  The  American  Cotton  System 

Common  Fractions  with  Decimal  Equivalents — 
Table  5. 

^»i  =.03125  of  a  dollar 

A(=A^.0625  "  "      " 

^.=.09375  "  "      " 

i=A=3*5=.125  "  "      " 

^^=.15625 
A=^'%=.18 

#j=.21875  "  " 

i=l=i\-=A=.250  "  " 

^=.21825  "  " 

A=M— 3125  "  " 

H-^.34375  "  " 

8 IB T2 •'J'O 

M=.40625  "  " 
tV=M=.4375 

1-1—46875 

i=-|=l=i\=M=.500  "  " 

^•=•53125  "  " 

tV=-M=.5625  "  " 

14=59375  "  " 

l=il=li=-625  "  " 

f^==.65625  "  " 

-H=||— 6875  "  " 


16 S2~ 

ff=.71875 


l=l=H-=M=.750  "  " 

M=.78125  "  " 

H=li=.8125  "  " 

H-=-84375  "  ■" 

-|-i-|-=M-=-875  "  " 

11=  90625  "  " 

H=-M=-9375  "  " 

f|=.96875  "   " 

i-=l=l=l=H=«=i.ooo  "  " 


Arithmetic  of  Cotton 


157 


Eeversing  the  tabular  form  of  decimals,  for  a  ready 
and  convenient  reference,  this  will  be  found  very  use- 
ful as  an  aid. 

No  fractions  with  equivalent  decimals  are  exhibited 
lower  than  sixteenths,  which  in  turn,  show  relative 
values  in  ''points." 


Table  6. 

.000625=.0006i/4  of  a  dollar  =^r\  of  a  cent  =  GV4  pts 

.00125  =00121/2  "  ' 

—  1     >> 

8 

'  =121/2  " 

.001875=. 00183^  "  ' 

^^18 

'     =183/4    " 

.0025    = 

=  \       " 

'    =25       " 

.003125=.0031%  "  ' 

=  ,\     " 

'    -311/4  " 

.00375  —00371/2  "  ' 

8 

'    -37 V2  " 

.004375=.00433^  "  ' 

=^t\   " 

'    =433/4  " 

.0050    = 

=  i  " 

'    =50       " 

.005625=.0056i4  "  ' 

9         '» 

1  6 

'    =561/4  " 

.00625  =.00621/2  "  ' 

0        " 

" 8 

'    =621/2  " 

.006875— 00683^  "  ' 

=\l   " 

'    —683^  " 

.0075    =               "  ' 

=  1    " 

'    =75       " 

.008125=.0081i/t  "  ' 

=H  " 

'     =811/4    " 

.00875  =.00871/2  "  ' 

=  i   " 

'    =871/2  " 

.009375=00933^  "  ' 

=H  " 

'  — 933^  " 

.0100    =             =  ] 

.  cent 

=n  " 

'    =100     " 

For  convenience  the  points  are  generally  expressed 
in  concrete  numbers,  as  2  points,  3  points,  6^/4  points, 
714  points,  instead  of  the  long  decimal  showing  equiv- 
alent value. 

Where  cents  are  connected  with  the  points,  the  deci- 
mal notation  is  usually  disregarded,  and  a  dot  placed 
between  the  cents  and  points,  making  thereby  cotton 
calculations  easier  by  the  avoidance  of  a  multiplicity 
of  figures. 


158  The  American  Cotton  System 

Ten  cents  and  2  points,  10.U2,  are  read  ten  naught 
two. 

Six  cents  and  1  point,  6.01,  are  read,  six  naught 
one. 

Twelve  cents  and  20  points,  12.20,  are  read,  twelve 
twenty. 

Two  cents  and  78  points,  2.78,  are  read,  two  seventy- 
eight. 

Fifteen  cents  and  25  points,  15.25,  are  read,  fifteen 
and  a  quarter. 

The  reader  who  desires  to  be  thorough  in  cotton 
calculations  is  urged  to  begin  at  the  beginning  of  this 
work — *' Arithmetic  of  Cotton'' — follow  it  through 
carefully,  and  in  a  short  time  will  be  able  to  make 
any  computation  on  cotton  he  may  desire. 

It  is  the  author's  intention  to  set  forth  so  clearly 
and  by  gradual  gradation  the  elucidation  of  all  the 
problems,  that  one  can  scarcely  avoid  understanding 
the  manipulation  of  them,  who  mil  take  a  little  time 
and  study  for  himself. 

As  nearly  all  cotton  calculations  involve  the  use 
of  both  the  common  and  decimal  fractions,  their  mean- 
ing can  be  readily  ascertained  by  reference  to  the 
tables,  which  explains  the  most  required  of  them. 

Where  cotton  quotations  are  given  involving  the 
•use  of  common  fractions,  and  the  reader  finds  it  diffi- 
cult to  execute  his  work  with  such  fractions,  he  can 
find  their  corresponding  values  in  the  decimal  table 
showing  equivalent  value  for  such  fraction  and  use 
this  equivalent  decimal  in  lieu  of  the  common  fraction. 


,     Arithmetic  of  Cotton  159 

EXAMPLES    INVOLVING   THE    USE    OF    THE 

CENT— DECIMAL  EQUIVALENT  $.01 

—100  POINTS. 

PROBLEMS. 

Ex.  1.  A  sells  1  bale  of  cotton  weighing  520  pounds 
at  10  cents  a  pound.  What  amount  of  money  does  he 
receive  ? 

Ans.  $52.00. 
Note. — It  is  evident  each  pound  of  cotton  brings 
10  cents  and  the  number  of  pounds  is  520,  he  receives 
520  times  10  cents,  which  equals  5200  cents.     Two 
figures  must  always  be  used  to  express  cents,  and  as 
cents  are  decimal  parts  of  a  dollar,  then  to  show  value 
in  dollars  a  dot  (.) — the  decimal  point — is  placed  to 
the  left  of  cents — thus  .10  (ten  one-hundredths). 
.10X520=$52.00. 
Explanation : 

.10 
520 


200 
50 


52.00 
The  multiplicand  here  contains  two  decimals,  hence 
two  decimals  must  be  cut  off  in  the  answer,  commenc- 
ing on  the  right  side  of  the  answer  and  counting  to- 
wards the  left. 

Ex.  2.  B  sells  2  bales  of  cotton;  their  weights  are 
516  and  534  pounds,  respectively,  for  10  cents  a 
pound.    What  is  their  total  value  at  this  price  ? 

Ans.  $105.00. 


160  The  American  Cotton  System 

Explanation : 

Add  weight  of  both  bales. 

One  bale  weighs 534  pounds 

One  bale  weighs 516  pounds 

Both  bales  weigh 1050  pounds 

10  cents  multiplied  by  1050  pounds  gives  the  total 
value.    10X1050=10500  or 
1050 
.10 


$105.00  Ans.  $105.00. 

Note. — Point  off  2  decimals  in  the  answer. 
Ex.  3.  John  Smith  sold  3  bales  of  cotton  at  nine 
(.09  cents)  cents  a  pound  for  all  of  it.  When  re- 
weighed  it  lost  10  pounds  from  gin  weights.  The 
bales  weighed  at  the  gin  516,  494,  and  530  pounds, 
respectively.     What  was  their  total  value? 

Ans.  $137.70. 

Explanation :    Their  weights  were 

1  bale     516  pounds 

1  bale     494  pounds 

1  bale     530  pounds 


Total  1540  pounds 
Lost  10  pounds 


Left     1530  pounds  at  9  cents 
.09 


Amount  $137.70 
Note. — Two  decimals  express  the  cents  (.09)   and 
two  are  counted  and  pointed  off  in  the  answer. 


Arithmetic  of  Cotton  161 

Ex.  4.  B  sold  2  bales  of  cotton,  one  weighing  525 
pounds  at  8  cents  a  pound,  and  the  other,  540  pounds 
at  7  cents  a  pound.  He  paid  10  cents  a  bale  for 
weighing.     What  amount  of  money  did  he  receive? 

Ans.  $79.60. 

Explanation. — One  bale  of  525  pounds  at  8  cents, 
equals  $42.00.  One  bale  of  540  pounds  at  7  cents 
equals  $37.80. 

The  tw^o  amounts  added  equal $79.80 

Less  the  weighing  (10  cents  each  bale) 20 


$79.60 

Note. — For  convenience  multiply  weight  of  each 
bale  by  its  price. 

525  pounds  540  pounds 

.08  .07 


$42.00  $37.80 

Price  of  1  bale  $42.00 

Price  of  1  bale  37.80 


Total  value  $79.80 

The  weighing  cost  .20 


Leaving  net  $79.60 

Ex.  5.    John  Myres  sold  2  bales  of  cotton  weighing, 

each,  535  and  515  pounds  at  9  cents  a  pound,  also, 

3  bales  each  495,  565  and  510  pounds  at  7  cents  a 

pound.    He  owed  15  dollars  for  ginning  and  10  cents 

a  bale  for  weighing.    How  much  money  did  he  receive 

for  the  cotton  and  how  much  had  he  left  after  paying 

expenses  ? 
11 


162  The  American  Cotton  System 

Ans.  Total  received,  $204.40;  after  paying  ex- 
penses, $188.90. 

Explanation :  Add  the  weights  of  the  first  2  bales 
and  multiply  the  sum  by  the  price;  add  the  last  3 
bales  and  multiply  the  sum  by  the  price  for  same. 

1  bale  weighing        535  pounds 
1  bale  weighing        515  pounds 


Total  weight       1050 
1050X.09=$94.50  for  2  bales. 

1  bale  weighing  495  pounds 
1  bale  weighing  565  pounds 
1  bale  weighing        510  pounds 


Total  weight        1570 

1570X.07=$109.90  price  for  3  bales 
94.50  price  for  2  bales 


Total  amount  $204.40  price  for  5  bales 
Ginning       $15.00 
Weighing  .50 


Total  expenses       15.50 


Net  receipts       $188.90 

Ex.  6.  John  Williams  was  offered  10  cents  a  pound 
for  4  bales  of  cotton,  which  price  he  refused,  but  sold 
two  months  later  for  9  cents  a  pound  and  lost  10 
pounds  in  weight.  Cotton  weight  at  first  was  2010 
pounds.    What  was  his  loss? 

Ans.  $21.00. 


Arithmetic  of  Cotton  163 

Explanation.— 10 X2010=$201.00  the  price  he  could 
have  received  at  first,  then  the  first  price  offered  was 

$201.00 
.09  X  2000=  ( price  now )  180.00 


Total  loss      $  21.00 
Note. — The  explanation  here  has  the  operation  of 
multiplication  indicated. 

Ex.  7.  Mr.  Anderson  could  get  10  cents  a  pound 
for  21  bales  of  cotton  weighing  11,340  pounds  with  no 
expenses  deducted;  he  sold  4  months  later  for  11 
cents  a  pound:  charges  against  the  cotton  were,  in- 
surance 30  cents  a  bale,  weighing  10  cents  a  bale,  de- 
livering to  depot  10  cents  a  bale.  The  cotton  gained 
60  pounds  in  weight.    What  was  his  gain  ? 

Ans.  $109.50. 
Explanation : 

Original  weight  11,340  pounds 

Gain  in  weight  60  pounds 


Weight  now  11,400  pounds 

11X11,400   (price  now)   =  $1,254.00 

Insurance  21  bales  at  30  cents  =$  6.30 
Weighing  21  bales  at  10  cents  =     2.10    * 
Hauling  21  bales  at  10  cents  =     2.10 


Total  expense  10.50 


Net  price  now  1,243.50 

Original  weight  11,340  pounds: 

10X11,340   (first  price)   =  1,134.00 


Total  gain  $    109.50 


164 


The  American  Cotton  System 


Ex.  8.  Jones  &  Brown,  ginners,  having  refused  an 
offer  of  9  ceuts  a  pound  for  40  bales  of  cotton,  held 
it  five  months  and  sold  for  10  cents  a  pound.  The 
cotton  originally  weighed  20,960  pounds,  but  gained 
140  pounds  on  final  sale.  The  charges  against  this 
cotton  were,  insurance,  60  cents;  drayage,  10  cents; 
sampling,  10  cents ;  commission,  15  cents  a  bale.  What 
was  gained  by  holding? 

Ans.     Gain  $185.60. 
Note. — Solve  as  example  7. 

Ex.  9.  What  would  be  Jones  &  Brown's  loss  if 
they  refuse  10  cents  a  pound,  hold  5  months,  sell  for 
9  cents  a  pound,  loss  140  pounds  in  weight  and  charges 
the  same  as  example  8? 

Ans.     Lost  $260.20. 
Explanation : 
Original  weight  20,960X.10=$2,096.00. 

Original  weight  20,960  pounds 

Lost  weight  140  pounds 


Weight  now 
.09X20820= 
Insurance        60X40=$24.00 
Drayage  10X40=    4.00 

Sampling        10X40=    4.00 
Commission     15X40=     6.00 


20,820  pounds 

$1,873.80 


Total  expense  (subtract) 


38.00 


Net  amount  now  $1,835.80 

Value  at  10  cents  2,096.00 

Value  at  9  cents  less  charges      1,835.80 


L»ss 


$    260.20 


Arithmetic  of  Cotton  165 

Ex.  10.  Fred  Smith  is  offered  11  cents  a  pound  for 
4  bales  of  cotton,  10  cents  a  pound  for  5  bales  of 
cotton,  9  cents  a  pound  for  6  bales  of  cotton,  8  cents 
a  pound  for  10  bales  of  cotton,  or  9  cents  a  pound 
for  the  whole  lot.  Cotton  averages  500  pounds  to  a 
bale.    Which  price  should  he  take? 

Ans.     Different  prices  for  different  lots. 

Explanation : 

lbs.       cts. 

4  bales  500  pounds  =  2,000 X.ll=$    220.00 

5  bales  500  pounds  =  2,50QX.10=     250.00 

6  bales  500  pounds  =  3,000 X. 09=     270.00 
10  bales  500  pounds  =  5,000 X. 08=     400.00 


Total  value  12,500  $1,140.00 

.09X12,500  pounds  =  1,125.00 


Would  have  lost  at  .09  all  round        $    15.00 

EXAMPLES    INVOLVING    THE    USE    OF    THE 

HALF  CENT— DECIMAL  EQUIVALENT 

$.005—50  POINTS. 

Remark  1. — By  reference  to  Tables  1  and  3,  it  will 
be  observed  that  i/2  is  represented  as  .0050  (five  one- 
thousandths)  of  a  dollar,  equivalent  in  value  to  5  mills 
and  showing  4  decimals.  A  naught  (0)  annexed  to 
the  right  of  a  decimal  adds  nothing  in  value  to  it,  as 
.5  (i\),  .50  (x%),  .500  {-A%%),  all  have  the  same 
value,  hence  when  the  decimal  .0050  is  written,  the 
same  value  exists  as  if  written  .005,  and  to  point  off 
3  decimal  places  in  the  product  is  sufficient. 

Remark  2. — I^et  it  be  required  to  find  the  value  of 
1  bale  of  cotton  of  500  pounds  weight  at  9%  (.095) 
cents. 


166  The  American  Cotton  System 

Here  9  cents  is  written  .09 

One-half  cent  is  written  .005 

Nine  and  one-half  cents  is  written  (decimally)   .095 

.095X500=$47.500. 

Try  the  same  with  4  decimals. 

.0950X500=$47.5000,  showing  no  gain  in  the  total 
value. 

Ex.  1.  Will  Smith  sold  3  bales  of  cotton  weighing 
520,  535  and  485  pounds  each  at  lOi/^  cents  a  pound, 
and  2  bales  weighing  510  and  525  pounds  each  at 
91/^  cents.    What  is  the  value  of  the  5  bales? 

Ans.  $260,021/2. 

Explanation : 
Add  the  weights  of  the  3  bales  which  are  1540  pounds. 
Ten  cents  is  written  $  .10 

One-half  cent  is  written  .005 

Their  decimal,  lOi/g,  is  .105 

.105X1540=  $161,700 

Add  the  2  bales'  weight,  which  is  1035. 

Nine  cents  is  written  $  .09 
One-half  cent  is  written  .005 


Then  9l^  cents  is 
.095X1035— 

$  .095 

1035 
.095 

5175 
9315 

98.325 

Total  value  for  5  bales 

1540 

.105 

7700 
1540 

$260,025 

$161,700  $98,325 


Arithmetic  of  Cotton  167 

Each  multiplier  has  3  decimals — 3  must  be  pointed 
off  in  the  product — the  answer  is  two  hundred  and 
sixty  dollars  and  two  and  one-half  cents. 

Ex.  2.  Mr.  Williams  sold  his  7  bales  of  cotton, 
which  had  been  exposed  to  the  w^eather  for  several' 
months,  for  11 14  cents,  if  not  damaged,  but  when 
delivered  to  buyer,  it  was  shown  to  be  badly  injured. 
It  was  agreed  to  make  nothing  off  in  weight,  but  re- 
duce the  price  %  cent  a  pound. 

The  cotton  weighed  3650  pounds.  What  was  rea- 
lized from  sale? 

Ans.  $401.50. 

Explanation : 

First  price  11.5  cents 

Deducted  for  ''country  damage"  00.5  cents 


Net  price  per  pound  11.0  cents 

.11X3650=$401.50. 

Note. — 

lli/o  cents  is  $  .115  decimally 
%  cent     is       .005  decimally 


$  .110 
%  cent  from  III/2  cents  leaves  11  cents. 

Ex.  3.     What  was  Mr.  William's  loss  for  weather 
or  ''country  damage"  on  his  cotton? 

Ans.  $18.25. 
Explanation : 

3650X111/2  (first  price)  =  $419.75 
3650X11       (sale  price)  =    401.50 

Lost  $  18.25 


168  The  American  Cotton  System 

Ex.  4.  Find  the  value  of  625  pounds  at  12i/4  cents, 
1130  pounds  at  IIV2  cents,  1510  pounds  at  10^  cents 
a  pound. 

Ans.  $366,621/2. 
Explanation : 

.125X  625=$  78.125 
.115X1130=  129.950 
.105X1510=  158.550 


Total  value  $366,625 
Note. — All  3  multipliers  here  have  3  decimals,  so  3 
decimals  must  be  pointed  off  in  the  answer. 

Ex.  5.  A  man  sold  5  bales  of  cotton  weighing  2640 
pounds  for  91/2  cents  a  pound.  One  week  before,  he 
was  offered  8^/2  cents  a  pound  for  the  same  cotton. 
How  much  did  he  gain  by  holding  one  week? 

Ans.  $26.40.' 
Explanation : 

Multiply  91/2X2640 
Multiply  81/2X2540 


Subtract 

Note. — If  multiplication  is  made  by  use  of  the  com- 
mon fraction  i/>,  point  off  2  decimal  places  in  the 
product. 

Ex.  6.  A  buyer  bought  50  bales  of  cotton  averag- 
ing 7I/2  cents  a  pound  in  price,  which  he  sold  six 
months  afterwards  for  9i/>  cents  a  pound.  His  ex- 
penses were  $1.50  a  bale;  what  w^as  his  gain  if  the 
cotton  weighed  26,000  pounds? 

Ans.  $445.00. 


Arithmetic  of  Cotton  169 

Explanation : 

.095X26000=  value  received  $2,470.00 
.075X26000=  value  paid  1,950.00 


Difference  $    520.00 

His  expenses  were  $1.50X50=:       75.00 


Leaving  net  gain  $    445.00 

Ex.  7.  A  farmer  having  6  bales  of  cotton,  sold  2 
for  8  cents  a  pound,  2  months  later  sold  2  for  8Y2  cents 
a  pound ;  3  months  after  this  sold  the  other  2  for  9^/2 
cents  a  pound.  The  first  2  weighed  1125,  the  second 
2,  990  and  the  third  2,  1105  pounds.  What  amount 
did  he  receive  ? 

Ans.  $279,121/2. 
Explanation : 

.08  X1125=  what? 
.085 X  990=  what? 
.095X1105=  what? 
Add  the  products. 

Ex.  8.  John  Watkins  raised  12  bales  of  cotton  on 
24  acres  of  ground.  He  paid  i/4  for  rent  and  %  of 
the  expense  for  ginning,  which  was  3  dollars  a  bale. 
'The  cotton  sold  for  ly^  cents  a  pound;  it  weighed 
6190  pounds.  What  amount  did  Mr.  Watkins  get 
for  his  cotton  ? 

Ans.  $348.1834. 
Explanation : 

The  total  weight  is  6190  pounds. 
%  belongs  to  Watkins. 
1/4  of  total  =15471/^  pounds. 
%  of  total  =15471/2X3=46421/2  pounds. 
.075X4642i/2=$348.1834. 

Note.— 4641/2=4642.5  (the  .5  is  A). 


170  The  American  Cotton  System 

Then  .075X4642.5=    4642.5 

.075 


232125 
324975 


348.1875 

There  is  1  decimal  in  the  multiplicand  and  3  in  the 
multiplier,  making  4  decimals  to  be  cut  off  from  the 
right  of  the  product,  giving  348  as  a  whole  number 
and  .1875  (=18%)  as  the  fractional  part  of  the 
product.  (Eeversing  the  multiplier  and  multiplicand 
for  convenience.) 

Ex.  9.  What  would  be  the  landlord's  value  of  the 
cotton  ? 

Ans.  $116,061/4. 

Explanation :    The  total  weight  is  6190  pounds.  The 
landlord  has  1/4,  which  is  15471/2  pounds. 
1547.5 X.075=$116.06i4,  his  part. 
Ex.  10.    Prove  that  this  is  correct. 
Explanation :    The  total  weight  is  6190  pounds. 
6190X.075=$464.25. 

Mr.  Watkins'  %=    $348.1834 
Landlord's        14=    $116.0614 


Both  =    $464.25 

Ex.  11.    What  amount  of  money  did  Mr.  Watkins 
have  after  paying  the  ginning? 

Ans.  $321.1834. 

Explanation :    His  total  amount  of  money  received 
was  $348,183/4. 

He  raised  12  bales. 


Arithmetic  of  Cotton  171 

%  of  them  were  his. 

1/4  of  them  was  3  bales. 

%  of  them  were  3X3  bales  =9  bales. 

3  (dollars)  X9  (bales)  =$27.00. 

He  received  $348.1834 

He  paid  for  ginning  27.00 


Leaving  for  him  $321,183/4 

Note. — Bales  are  not  multiplied  by  dollars,  but  as 
there  are  9  bales,  and  the  price  for  ginning  is  3  dol- 
lars for  each  bale,  it  is  evident  3  dollars  must  be 
for  each  bale,  and  as  there  are  9  of  them, 
the  multiplication  is  performed  by  multiplying  the 
3X9  to  get  the  total  amount.  The  3  here  is  dollars, 
and  the  result  is  9  times  3  dollars,  equalling  27  dol- 
lars. 

EXAMPLES   INVOLVING   THE   USE    OF    THE 
QUARTER  CENT— DECIMAL  EQUIVA- 
LENT $.0025—25  POINTS. 

Remark. — The  i/4  represented  here  shows  the  frac- 
tional part  of  a  cent,  which,  decimally,  is  .01,  and 
%  of  it  equals  .0025  (twenty-five  ten-thousandths)  of 
a  dollar.     (See  tables  1  and  3.) 

Ex.  1.  Tom  Williams  sold  5  bales  of  cotton  weigh- 
ing 2580  pounds  at  8%  cents  a  pound.  "What  is  the 
total  value? 

Ans.  $212.85. 

Explanation:  Multiply  the  weight  by  the  price, 
2580X.0825=$212.85. 

The  25  points  involved  necessitates  the  use  of 
decimals  to  the  fourth  place. 


OF   THE 


172  The  American  Cotton  System 


Note. — Eight  cents  is 

.08 

Twenty-five  points  are 

.0025 

Then  8  cents  and  25  points  == 

.0825 

decimally,  which  equals  814  cents. 

2580 

.0825 

• 

12900 

5160 

20640 

212.8500 

Cut  off  4  figures  in  answer,  as  there 

are  4  decimals 

in  the  multiplier. 

The  operation  can  be  performed  this 

way: 

2580 

81/4 

20640 

645 

21285 

How  can  you  tell  what  the  product  is? 

Where  will  you  place  the  dot  or  decimal  point  ? 

The  instruction  given  in  the  use  of  the  decimal  in 
multiplication  will  guide  the  student.  If  a  naught 
(0)  is  placed  in  front  of  the  8^/4  then  the  multiplier 
would  be  .081/4  dollars  and  2  figures  would  be  cut  off 
placing  the  dot  in  front  of  the  8,  showing  the  an- 
swer to  be  212.85. 

Ex.  2.  A  sells  3  bales  of  cotton,  1  weighing  495 
pounds  at  10^/4  cents,  for  the  other  2,  whose  weights 


Arithmetic  of  Cotton  173 

are  512  and  518  pounds,  he  sells  at  9%  cents  a  pound. 
What  is  the  total  cash  received? 

Ans.  $148.5834. 
Explanation. — Multiply    weight    of    first    bale    by 
101/4  (.1025)  cents,  and  the  sum  of  the  2  bales  by  91/1 
(.095)  cents. 

495X1025=$  50.7375 
512+518=1030X.095=    97.8500 


Total  received  $148.5875 
Ex.  3.  Henry  Jones  took  1500  pounds  seed  cotton 
to  the  gin  for  which  he  was  offered  314  cents  a  pound 
in  the  seed,  not  selling  on  this  offer  he  had  it  ginned, 
the  cotton  'Hhirded  itself.^'  The  ginning  cost  3  dol- 
lars. He  sold  the  bale  for  IOI/4  cents  a  pound  and 
the  seed  at  the  rate  of  16  dollars  a  ton.  Did  he  gain 
or  lose,  and  how  much  by  having  the  cotton  ginned? 

Ans.  Gain  $7.50. 

Explanation :    Seed  cotton  weighed  1500  pounds. 

i  =  weight  of  bale  =  500  pounds 

I  =  weight  of  seed  =1000  pounds 

500X.1025=  $51.25 

2000  pounds  weight  equals     1  ton  =$16.00 

1000  pounds  weight  equals  1/2  ton  =    8.00        8.00 


Total  received  for  cotton  and  seed  $59.25 

Less  expense  for  ginning  3.00 

Net  amount  received  $56.25 
1500  pounds  seed  cotton  at  31/4  cents  =  1500 

X.0325=  value  in  the  seed  =  48.75 


Gained  by  having  it  ginned  $  7.50 


174  The  American  Cotton  System 

Note. — This  cotton  is  figured  as  having  no  loss  from 
trash  or  dirt. 

Ex.  4.  Would  Jones  have  gained  anything  had  he 
sold  the  cotton  for  9%  cents  a  pound  and  the  seed 
at  12  dollars  a  ton  ? 

Ans.  Gain,  $3.00. 
Explanation : 

500X.0975=  $48.75 

1000=1/2  ton  =  (at  $12.00)       6.00 


Total  received,  gross  $54.75 

Less  ginning  expenses  3.00 


Total  received,  net  $51.75 

1500X.325  (314  cents)  =        48.75 


Gain  $  3.00 

Ex.  5.  A  farmer  had  a  bale  of  cotton  ginned  in 
which  there  was  an  excess  of  moisture,  causing  the 
lint  to  show  '^gin  cuts"  and  ^'naps;''  had  it  been 
ginned  dry  it  would  have  classed  middling  and  been 
worth  101/2  cents  a  pound,  but  owing  to  imperfect 
ginning  it  was  sold  for  10%  cents  a  pound  and  10 
pounds  in  weight  deducted  for  dampness.  Bale 
weighed  560  pounds  before  deduction.  How  much 
loss  to  this  man  for  having  his  cotton  ginned  wet? 

Ans.  Lost  $2,421/2. 
Explanation : 

560X.105     (101/2)=      $58,800 
550 X. 1025  (1014)=        56.375 


$  2.425 
Ex.  6.    A  grower  took  3  bales  of  cotton  to  market 


Arithmetic  of  Cotton  175 

weighing  516,  522  and  532  pounds,  for  which  he  was 
offered  9%  cents,  gin  weights,  or  91^  cents  and  have 
the  cotton  re- weighed  at  the  public  scales;  he  sold  on 
gin  weights.     What  was  his  gain  or  loss? 

The  re-weights  were  506,  519  and  530. 

Ans.  Lost  $2.50. 

Explanation. — Add  gin  weights  and  multiply  by 
914  (.0925)  cents.  Add  the  reweights  and  multiply 
by  ^Yz  (.095)  cents.  Subtract  the  lesser  from  the 
greater  number;  if  the  product  of  gin  weights  show 
greater,  there  will  be  a  gain,  otherwise  a  loss. 

Ex.  7.  Tom  Sanders  found  the  market  down  14 
(25  points'!  when  he  offered  his  4  bales  of  cotton  for 
sale  which  weighed  2620  pounds.  What  was  his  loss 
by  the  decline  if  he  sold  for  914  cents? 

Ans.  Lost  $6.55. 

Explanation : 

(1)  2620X.095  =  price  before  decline  $248.90 
2620 X. 0925=  price   after  decline    242.35 


Lost  $     6.55 

(2)  First  price  .0950  (914) 

Second  price  .0925   (914) 

Difference   (loss)     .0025   (  %) 

2620X.0025=$6.55. 

Ex.  8.     Mr.  Henderson  offered  to  take  "10  cents  a 

pound  for  his  5  bales  of  cotton  and  deduct  30  pounds 

for  damage;  the  buyer  made  a  counter  offer  of  9%. 

cents  a  pound  instead,  with  no  deduction  for  weight ; 

the  cotton  weighed,  without  deduction,  2580  pounds. 

Mr.  Henderson  sold  at  the  buyer's  offer;  did  he  gain 

or  lose  in  the  sale? 

Ans.  Lost  $3.45. 


176  The  American  Cotton  System 

Ex.  9,  A  tenant  rented  40  acres  of  land  at  3  dol- 
lars an  acre,  which  land  was  planted  in  cotton  and 
produced  10  bales  weighing  5390  pounds,  which  he 
sold  at  8%  cents  a  pound,  and  paid  for  ginning  $32.34. 
Would  he  have  gained  or  lost  in  the  transaction  had 
he  rented  to  pay  14  the  cotton  and  each  pay  his  own 
expense  for  ginning  at  60  cents  a  hundred? 

Ans.  Gained  $16.93  to  pay  14  rent. 
Explanation : 
5390X.0825  (814)  =  value  of  cotton  $444,675 
Less  rent  120.000 


$324,675 
Ginning  32.340 


Net  amount  $292,335 

14  of  5390  pounds  =1347.5=  rent. 
5390—1347.5=4042.5=  tenant's  part. 
4042.5X.0825   (814)  =  value  $333.50+ 

4042.5X60=  cost  ginning  24.25+ 


Net  amount  renting  for  part  of  crop  $309.25+ 
Net  amount  renting  money  rent  292.33+ 


Gain  $  16.92 

Ex.  10.  The  landlord  received  from  the  tenant 
(Ex.  9),  cash,  $120;  what  would  he  have  received  for 
1/4  the  cotton,  if  sold  at  the  price  the  tenant  secured, 
and  pay  his  part  of  the  ginning? 

Ans.  $103.08+. 
Explanation : 
V4  is  1347.5  pounds  X.0825  (814)=  $111.16+ 

Ginning  13471/2X60  cents   a  hundred  =         8.08+ 


Net  receipt  $103.08+ 


Arithmetic  of  Cotton  177 

EXAMPLES    INVOLVING    THE    USE    OF    THE 

ONE-EIGHTH     ( Vs )     CENT— DECIMAL 

EQUIVALENT   $.00125—121/2   POINTS. 

Ex.  1.  A  man  sold  1  bale  of  cotton  weighing'  560 
pounds  at  9%  cents  a  pound.  What  was  its  value  in 
dollars  and  cents? 

Ans.  $51.10. 
Explanation :     Multiply  the  weight  of  the  bale  by 
its  price  per  pound.    560X. 09125  (91/8)  =$51.10. 
Note. — Nine  cents  =  $  .09 

One-eighth  cent  =  .00125 


Nine  and  one-eighth  cent  =  $  .09125 
Ex.  2.     Find  the  worth  of  1600  pounds  of  seed 
cotton  at  3%  cents  a  pound. 

Ans.  $50.00. 
Explanation:     1600X. 03125=   (See  Table  6). 
Ex.  3.     Mr.  Smith  sold  8  bales  of  cotton  for  lli^ 
cents  a  pound  to  a  street  buyer,  after  refusing  11% 
cents  from  the  first  bidder.    What  did  he  gain  by  sell- 
ing at  1114  cents?     Cotton  weight  4120  pounds. 

Ans.  $5.15. 
Explanation : 

4120X.1125     (1114)=  $463.50  , 

4120X.11125  (111/8)=    458.35 


$     5.15 

Note. — In  first  multiplication,  count  off  4  figures, 

and  in  second  count  off  5  figures  in  the  answer. 

Ex.  4.     Mr.  Anderson  sold  1  bale  of  cotton,  512 

pounds,  at  9l^ ;  1  bale,  520  pounds,  at  914 :  and  1 
12 


178  The  American  Cotton  System 

bale,  560  pounds,  at  9%  cents  a  pound.     How  much 
money  did  he  receive  for  all? 

Ans.  $148.54. 
Ex.  5.    Diltz  &  Weaver  bought  50  bales  of  cotton, 
weighing  25,500  pounds,  and  sold  it  for  Yg  advance. 
What  was  their  gain  on  the  sale  ? 

Ans.  $31,871/2. 

Explanation :     (1)     Multiply  total  weight  by  price : 

25,500X.00125  (Vg)  =$31,875.     (2)     25,500-^50= 

weight  of  each  bale  =510  pounds  X -00125=  gain  on 

each  bale  =$  .6375;  $  .6275=63%  cents  X50=  gain 

on  all  the  bales  =$31,875. 

.6375  25,500 

50  .00125 


31.8750  127500 

51000 
25500 


31.87500 
Note. — (1)  In  first  multiplication  point  off  4  deci- 
mals in  answer,  in  the  second,  5.  (2)  The  same  re- 
sult may  be  obtained  by  dividing  the  total  weight 
(25,500  pounds)  by  8,  as  in  abstract  numbers,  and  is 
equivalent  to  multiplying  by  8  decimally. 
8)25,500 


31.875 

Note. —  (2)  It  should  be  noted  that  %  of  a  cent  is 
made  on  each  pound  of  cotton,  equal  to  121/0  cents  on 
each  one  hundred  pounds,  and  to  determine  the  loca- 
tion of  the  decimal  point,  first  divide  25,500^-100, 
which  would  give  255. 


Arithmetic  of  Cotton  179 

255-f-8=31  as  a  whole  number,  then  annex  naughts 
to  the  255  and  continue  the  division  until  it  is  exact 
or  repeats  itself,  then  after  the  whole  number  place 
the  period,  the  numbers  following  are  the  fractional 
numbers.  The  third  naught  added  gives  no  increase 
in  value,  but  enables  the  operation  to  be  completed  to 
exactness. 

Ex.  6.  John  Knox  having  900  pounds  of  seed  cot- 
ton, bought  600  pounds  more  to  complete  his  bale.  He 
paid  3%  cents  a  pound  for  the  600  pounds.  The  cot- 
ton thirded  itself  including  bagging  and  ties,  when 
ginned,  the  bale  was  sold  for  10%  cents  a  pound,  and 
the  seed  at  the  rate  of  20  dollars  a  ton.  What  did 
Mr.  Knox  gain  on  the  seed  cotton  bought? 

Ans.  Gain,  $5.50. 

Explanation : 
600  pounds  =  weight  of  cotton  bought. 
200  pounds  =  weight  of  \  cotton  bought. 
200X. 10125  (10%)  =  $20.25 

600  pounds  =  weight  of  seed  cotton. 
200  pounds  =  weight  of  lint. 
600—200=400  pounds  seed. 
2000  pounds  weight  of  1  ton. 
400  pounds  =  ^  weight  of  1  ton. 
2000  pounds  are  worth  $20.00 

400  pounds  are  worth  i  of  20.00=  4.00 


Value  of  seed  and  lint  received  $24.25 

600  pounds  X. 03125  (31/8)  =  cost  =  18.75 


Gain  on  600  pounds  seed  cotton  $  5.50 

Ex.  7.  Henry  Brown  sold  1  bale  of  cotton,  520 
pounds,  at  6%  cents  a  pound.  How  much  money  did 
he  get  for  it  ? 

Ans.  $32.45. 


180  The  American  Cotton  System 


Explanation:     If  y8=.00125, 

5/8    will    ! 

.00125— .00625.     (See  Table  6.) 

Six  cents  is 

$  .06 

Five-eighths  are 

.00625 

Six  and  five-eighths  =  $  .06625 
520  X. 06625=  price  =$32.45. 

Ex.  8.  Mr.  Jones  sold  10  bales  of  cottpn;  3  bales, 
1616  pounds  10%  cents  a  pound;  4  bales,  2120  pounds 
at  9%  cents  a  pound;  3  bales,  1560  pounds  at  9ys 
cents  a  pound.    What  was  the  total  value  of  all? 

Ans.  $515.22. 

Ex.  9.    A  grower  sold  1  bale  of  cotton  for  9%,  1  for 

9%  and  1  for  9%  cents  a  pound.    Supposing  the  bales 

to  be  of  equal  weight,  what  would  be  the  average 

price? 

Ans.  9%  cents. 
Explanation:  (1)  By  inspection  it  is  seen  that 
the  price  of  1  bale  is  9%  cents  a  pound,!  more  make 
the  % ;  1  less  =% ;  the  |  above  and  the  |  below  the 
%,  offset  or  cancel  each  other,  leaving  9%  cents  as 
the  average. 

(2)  1  bale  at  .09875  (9y8) 

1  bale  at  .09625  (9%) 
1  bale  at  .09375  (9%) 


Add  price  of  3  bales  3). 28875 

Divide  by  3  (No.  bales)  =09625  (95/8) 

Ex.  10.  A  sold  3  bales  of  cotton  for  $1613/8,  2  bales 
of  cotton  for  $102^/8,  5  bales  of  cotton  for  $2523/8. 
What  is  the  total  value  in  dollars  and  cents? 

Ans.  $515,871/2. 


Arithmetic  of  Cotton  181 

Explanation :     Referring  to  Table  5 — 
$3/8  equals  $  .375 
Vs  equals       .125 
3/s  equals       .375 


Total   =   $  .875  =  871/0  cents 

EXAMPLES    INVOLVING    THE    USE    OF    THE 

ONE-SIXTEENTH    CENT— ^V— DECIMAL 

EQUIVALENT  .000625—614  POINTS. 

Ex.  1.    What  is  the  value  of  1  bale  of  cotton,  weigh- 
ing- 534  pounds  at  7 ^\  cents  a  pound? 

Ans.  37.71%. 
Explanation :     By   referring  to   Table   6,   one-six- 
teenth of  a  cent  decimally  is  .000625 
Seven  cents  are  .07 


Seven  and  jV  cents  are  .070625 
534X.070625=$37.71375. 

Note.— Table  6,  .00375=3/^.  Note  the  71  cents 
occupy  the  place  of  the  2  naughts. 

Ex.  2.  A  man  sold  1  bale  of  cotton,  544  pounds, 
at  9^V  cents,  1  bale  of  cotton,  528  pounds,  at  8yV 
cents.    What  is  the  value  of  both? 

Ans.  $91.87. 
Explanation : 
(1)  Nine  cents  are  $  .09 

One-sixteenth  cent  is  .000625 


Nine  and  one-sixteenth  =$  .090625 
544X.090625=$49.30 
528  X. 080625=  42.57 


Vahie  of  both  bales  $91.87 


182  The  American  Cotton  System 

(1)       .090625  .080625 

544  528 


362500  645000 

362500  161250 

453125  403125 


49.300000  42.570000 

Note. —  (1)  For  convenience  the  multiplier,  which 
contains  6  decimals,  is  placed  at  the  top,  the  same 
number  to  be  pointed  off  in  the  answer. 

(2)       544  528 

:09tV  .08rV 


4896  4224 

34  33 


$49.30         '  $42.57 

Note. —  (2)  In  the  last  multiplication  only  2  deci- 
mals are  cut  off  as  the  multiplier  is  cents  and  has 
only  2  decimals.  In  multiplying  by  the  one-sixteenth, 
divide  the  weight  of  the  bale  by  16  and  add  to  the 
first  partial  product  in  the  multiplication. 

Ex.  3.  John  Knox  was  offered  81/2  cents  a  pound 
for  10  bales  of  cotton  weighing  5160  pounds,  but  re- 
fused the  offer,  held  his  cotton  and  sold  next  day  for 
^  cents  a  pound  less.  What  did  he  lose  by  not  sell- 
ing on  first  offer? 

Ans.    Lost  $3,221/2. 

Explanation : 

(1)  5160  pounds  X.085  (81/2)  =  first  offer  $438.- 
60. 


Arithmetic  of  Cotton  183 


( 2 )     .085— .000625=.084375=8  ,\ . 
.085000 
.000625 


.084375=8/, 
Again — 

81/2=  8A 

Less  iV 


Equals  8A=.084375 

5160  pounds  X.084375   (8 A)  =435.371/2. 
First  offer        $438.60 
Sold  for  435.371/2 


Lost      >.  $     3.221/2 

cent  a  pound;  the 
operation  can  be  abbreviated  by  multiplying  the  total 
weight,  5160,  by  xV  cents,  and  point  off  2  decimals 
in  the  answer,  as  vV  cent  is  expressed  thus,  OO^V, 
5160X.00tV  =$3.225=3.221/2— equivalent  to  dividing 
by  16. 

Ex.  4.  Mr.  James  had  4  bales  of  cotton  of  4  diff- 
erent grades,  for  which  he  was  offered  4  different 
prices:  1  bale,  500  pounds,  at  9iV  cents;  1  bale,  500 
pounds,  at  9  cents ;  1  bale,  500  pounds,  at  8^f  cents ; 
1  bale,  500  pounds,,  at  8%  cents.  As  the  cotton 
averaged  500  pounds  to  the  bale,  what  was  the  ave- 
rage price? 

Ans.  .0896%  cents. 
Explanation:     Referring  to  Table  6,  9iV  cents  = 
.090625. 

Nine  and  t^  cents  =   $.090625 
Nine  cents  =  .09 

Eight  and  U  cents  =  .089375 
Eight  and  %  cents  =  .08875 


Total  $.358750 


184  The  American  Cotton  System 

Add  the  numbers  and  divide  by  4,  as  there  are  4 
bales,  the  answer  will  be  the  average  price. 
4). 3587500 

_==.0896y8   cents. 

.0896875 
Note. — Table  5  will  show  %  to  be  }t;  then  the  4 
bales  will  be  9tV,  9,  8fi,  8ff. 

Ex.  5.  Three  bales  of  cotton  weighing  521,  499 
and  580  pounds  were  sold  for  S\i  cents  a  pound.  What 
wais  their  value? 

Ans.  $143.00. 
Explanation:  Multiply  the  sum  of  the  weights  by 
.08|f=.089375  and  point  off  6  figures  in  the  answer. 
Ex.  6.  A  farmer  sold  3  bales  of  cotton  weighing 
516,  524  and  520  pounds,  at  8y\  cents  a  pound;  2 
bales,  519  and  541  pounds,  at  8iV  cents.  How  much 
money  did  he  receive? 

Ans.  $213,183/4. 

Explanation:  Add  first  the  weights  of  the  3  bales 
and  multiply  by  .08 A  (.081875);  add  weights  of 
the  2  bales  and  multiply  by  .08tV  (.080625)  ;  then 
add  the  2  answers. 

Ex.  7.  A  list  of  100  bales  of  cotton  was  sold  for 
i\  cents  above  the  market ;  the  cotton  weighed  52,480 
pounds.  What  was  the  gain  by  selling  this  cotton  in 
bulk? 

Ans.  Gain,  $98.40. 

Explanation:  Multiply  the  whole  weight,  52,480 
X. 001875  (fV),  point  off  6  decimals  in  the  answer, 
the  result  will  be  the  whole  amount  in  dollars  and 
cents. 

Note. — It  is  immaterial  what  the  price  paid  or  what 
the  cotton  is  worth;  the  statement  is,  the  cotton  sold 
for  y\  above  the  quoted  price  in  the  market.     If  the 


Arithmetic  of  Cotton  185 

price  were  7  cents,  the  cotton  sold  for  f%  more ;  if  8, 

9,  10  or  11  cents  a  pound  were  the  market  quotations, 

it  sold  for  y\  more. 

Ex.  8.     A  buyer  received  a  limit   (price)   of  10i/> 

cents  a  pound  on  which  to  buy  cotton ;  during  the  day 

he  bought  100  bales :    28  bales,  14,560  pounds,  at  103/^ 

cents;  32  bales,  16,160  pounds,  at  lO^/i  cents;  40  bales, 

20,320  pounds,  at  10  j^^  cents.     How  much  money  did 

he  make  on  the  day's  business?  ,         ._^  ,^^ 

Ans.  $71.30. 

Explanation:      Find    out    how    much    the    whole 
amount  is  worth  at  101/2  cents.     (Table  6.) 
14560  pounds 
16160  pounds 
20320  pounds 


51040X101/2=  $5,359.20 

Calculate   separate   amounts — take   sum 
from  first  amount. 

14560X. 10375  (103/^)  =  $1,510.60 
16160X-1025  (IO14)  =  1,656.40 
20320X. 104375   (10,V)   =      2,120.90       5,287.90 


$  71.30 
Ex.  9.  A  farmer  rented  land  on  the  halves.  On 
50  acres  he  made  20  bales  of  cotton,  which  he  sold  at 
lOj^  cents  a  pound;  the  cotton  averaged  500  pounds 
to  the  bale.  The  land  owner  gave  his  half  of  the  seed 
to  the  tenant  for  hauling  10  bales  to  the  gin  and  to 
market. .  The  ginner  charged  60  cents  per  hundred  for 
ginning  and  gave  the  ginning  and  3  dollars  a  bale 
for  the  seed  in  each  bale  of  seed  cotton.  The  farmer 
sold  17  bales  of  seed  and  put  1500  pounds  of  seed 
cotton  in  each  bale  and  hired  14  bales  picked  at  70 


186  The  American  Cotton  System 

cents  a  hundred.     What  amount  of  money  had  he 
left? 

Ans.  $404,371/2. 
Explanation :     Twenty  bales  at  500  pounds  each  = 
500X20=10000  pounds. 

lOOOOXlOi^  (.101875)  =  value  of  cotton      $1,018.75 
Received  3  dollars  a  bale  on  17  bales. 
17X3=  value  of  seed  51.00 


Receipts  for  cotton  and  seed  $1,069.75 

He  paid  for  ginning  3  bales        $     9.00 

He  paid  1/2  the  cotton,  10  bales       509.371/2 

He  paid  for  picking  14  bales 

1500  pounds  at  70  cents,  $10.50 

14  bales  =14X10.50=  147.00 


Total  paid  665.371/2 


Amount  left  $  404.371/2 

Ex.  10.  The  tenant  (Ex.  9)  owed  taxes,  $6.20;  a 
merchandise  account,  $185.70;  a  doctor,  $15.30;  a 
blacksmith,  $3.50;  a  hired  man,  8  months  at  15  dol- 
lars a  month.    What  was  his  net  gain  for  the  year? 

Ans.  $73,671/2. 
Explanation : 
From  sale  of  cotton  and  seed  he  had  left      $404.37iy4 


He  owed  taxes 

$     6.20 

Store  account 

185.70 

Doctor's  bill 

15.30 

Blacksmith 

3.50 

Help  8  mos.  at  $15= 

=15X8= 

120.00 

Total  indebtedness 

330.70 

After  paying  indebtedness,  left  $  73.671^ 


Arithmetic  of  Cotton  187 


EXAMPLES    INVOLVING    THE   USE    OF    THE 

^  CENT— DECIMAL  EQUIVALENT 

$  .0003125—31/8  POINTS. 

Ex.  1.  What  is  the  value  of  one  bale  of  cotton,  534 
pounds,  at  7^  cents  a  pound? 

Ans.  $37.54H 
Note. — Solve  as  No.  1,  — 6i/4  points. 
[534X.'07gi2  (.0703125)]  =  ? 

Ex.  2.  A  man  sold  1  bale  of  cotton,  544  pounds, 
at  9^;  1  bale  of  cotton,  528  pounds,  at  83V.  What  is 
the  value  of  both  ? 

Ans.  $91,531/2. 
Note. — Solve  as  No.  2,  under  6i/4  points. 
544X.09^(.0903125)=$49.13 
528X.08^(.0803125)=  42.401/2 


$91,531/2 

Ex.  3.  Proceed  as  in  No.  3,  under  tV  at  ^  instead, 
and  find  the  loss. 

Ans.  Loss  $1.6114. 

Note.— The  loss  in  No.  3  was  $3.221/2 ;  for  brevity, 
^  being  %  of  yV?  then  the  loss  here  is  %  of  $3,221/2, 
which  is  $1.6l4. 

Ex.  4.  Johnson  &  Smith  bought  20,560  pounds  of 
cotton  at  9^  cents  a  pound  and  sold  it  for  9%.  What 
was  their  gain? 

Ans.  $44,971/2. 

Explanation:  By  Table  5,  1/4  equals  ^\,  then  9i^ 
=9  A. 

9^— 9^=T!r  as  a  gain. 

20,560  pounds  X  A  cents  =$44,971/2. 

[20,560X.0021875=(.00A)]  ? 


188  The  American  Cotton  System 

The  result  is  the  same  if  the  value  is  obtained  at 
914  cents,  from  which  subtract  the  value  at  9^\  cents. 
20,560X.09i4=$l,901.800 
20,560X.09^2=  1,856.825 


Gain  $    44.975 

Ex.  5.  Three  bales  of  cotton,  526,  497  and  545 
pounds,  respectively,  were  sold  for  8^  cents  a  pound. 
Find  their  value. 

Ans.   $132.70. 

Explanation:  Multiply  total  weight  by  .0846875 
(Table  5)  ;  count  7  figures  off  to  decimal  place. 

(1568  pounds  X. 0846875). 

Ex.  6.'  A  buyer  bought  50  bales  of- cotton  at  lO^'V 
cents  a  pound  avera«re,  held  it  two  months  and  sold  it 
for  10  14  ;  his  expenses  were  insurance  40  cents,  wei^h  • 
mg  10  cents,  and  drayage  10  cents  a  bale.    The  cotton" 
weighed  25,600  pounds.     What  was  the  gain  or  loss? 

Ans.  Gain  $98.00. 

Explanation : 
(1)     25,600X.10M=  $2,744.00 

25,600X103^-=  2,616.00 


Total  gain  =  $    128.00 

The  insurance,   weighing   and  drayage  cost 

60  cents  a  bale,  50X60=  30.00 


Net  gain  $      98.00 

(2)     M-A=M- 

(The  fl  are  H  of  a  cent.) 
^=y2  of  a  cent  =.005. 
25,600  X.005=$128.00. 


Arithmetic  of  Cotton  189 

Ex.  7.  A  farmer  sold  35  bales  of  cotton  to  a  buyer 
for  81/2  cents  a  pound,  to  be  delivered  in  5  days,  dur- 
ing this  time,  before  delivery,  the  market  declined  ^\ 
cents  a  pound.  The  buyer  offered  40  dollars  to  the 
farmer  to  cancel  the  sale;  the  cotton  weighed  18,550 
pounds.  What  would  the  buyer  have  saved  or  lost 
had  the  farmer  accepted  the  40  dollars? 

Ans.  Saved  $11.01^^ 
Explanation:     81/2  cents  =8|^|. 
(1)     8i|— ^\=8H. 

18,550X8y2(.085         )=$1,576.75 
18,550X8H(.0834375)=  1,547.76/e 


$      28.98tV 
Buyer  offered  $40.00 

Actual  difference  28.98iV 


$ii.oiA 

(2)     Multiply  weight  by  price  of  decline,  3%. 

18,550  X  .00  #^  ( .0015625 )  =28.984375=28.98^ 

Ex.  8.  John  Patton  was  offered  ten-thirty-seven 
and  one-half  (10.371/2)  for  his  8  bales  of  cotton,  by 
one  buyer,  and  ten  and  twelve  thirty-seconds  (.10^) 
by  another;  which  offered  the  best  price  and  what 
would  he  have  gained  or  lost  by  selling  to  the  first 
buyer  ? 

Answer.     Neither.    Nothing. 

Note.— See  Tables  5  and  6  for  %,  if  and  .00371/2. 

Ex.  9.  Thompson  &  Brown  shipped  100  bales  of 
cotton  to  New  Orleans,  the  returns  from  the  sale  of 
which  showed  a  loss  in  weight  equivalent  to  ^  in 
price.  The  cotton  weighed  52,800  pounds.  What  was 
the  money  loss? 

Ans.  $16.50. 


190  The  American  Cotton  System 

Explanation:  It  is  evident  the  loss  being  ^ 
equivalent  to  3%  points,  the  total  weight  should  be 
multiplied  by  the  price. 

52,800  pounds  X.00^=$16.50. 

52,800X3%  will  give  same  results,  but  as  it  takes 
4  figures  to  make  the  number  of  points,  the  common 
fraction  being  used  in  place  of  the '  completed  deci- 
mal, four  figures  must  be  counted  off  to  give  the  num- 
ber of  cents  and  parts  of  a  cent. 

Ex.  10.  Ayres  &  Co.,  shipped  60  bales  of  cotton  to 
Savannah,  which  lost  2|  pounds,  average,  to  the  bale 
and  A  valuation  in  classification.  They  paid  for 
30,592  pounds  at  8|  cents  a  pound  and  sold  it  de- 
livered in  Savannah  at  9^.  The  freight  rate  was 
30  cents  a  hundred  and  commission  1  dollar  a  bale. 
What  was  the  gain  or  loss  on  this  shipment? 

Ans.  Gain,  $13.25^. 

Explanation:  Find  total  loss  in  weight,  subtract 
this  from  original  weight ;  find  value  of  net  weight  at 
9^,  and  from  this  deduct  the  sum  of  the  expenses, 
loss  in  value,  and  first  cost. 

60  bales  X2|  pounds  =160  pounds. 

30592  less  160=30,432  pounds. 
30,432  X  .09^  ( .0928125 )  =  $2,824,470 

81  cents  =860=.0860 
30,592 X.0860=first  cost  =      $2,630,912 
30,592X30=  freight  cost  =  91.776 

60  X  $1.00=  commission  =  60.000 

30,432X A (-0009375)  loss  in 

class  28.530 


Total  cost,  delivered  2,811.218 


Net  gain  $      13.252 


Arithmetic  of  Cotton  191 

Note. — To  get  the  true  result  in  multiplying  30,592 
X30,  30,592  should  first  be  divided  by  100,  as  freight 
rate  is  30  cents  per  hundred  poui^ds,  and  the  quotient 
multiplied  by  30. 

Freight  rates  are  calculated  on  the  weights  shown 
at  shipping  point,  but  the  weights  are  generally  veri- 
fied at  destination  and  if  found  incorrect,  the  charges 
are  calculated  on  the  corrected  weights. 

The  loss  of  ^  in  classification  is  here  calculated  on 
destination  weights,  as  they  are  the  weights  govern- 
ing the  settlement. 


CHAPTER  VI. 
BASIC  COTTON  CALCULATIONS. 

Many  expressions  and  abbreviations  peculiar  to  the 
cotton  trade  are  used,  and  as  such  will  enter  largely 
into  the  statement  of  problems  in  this  volume,  their 
introduction  here  may  not  be  inappropriate. 

It  is  suggested  that  the  reader  familiarize  himself 
with  them  in  order  to  appreciate  and  understand  their 
meaning  and  value. 

The  terms  are  expressive  to  those  familiar  to  the 
cotton  trade,  but  to  those  who  are  not  they  will  prove 
instructive. 

ABBREVIATIONS. 

B/L— Bill  of  lading. 

B/C — Bales  of  cotton. 

M/B — Middling  basis. 

B/M — Basis  middling. 

(B/M  and  M/B  have  the  same  meaning.) 

C.  A.  F.— Cash  and  freight. 

F.  0.  B.  or  fob — Free  on  board. 

Cwt. — Hundred  weight. 

Lbs. — Pounds. 

TERMS. 

Long. — Long  cotton  signifies  the  amount  of  cotton 
one  has  in  his  immediate  possession.  If  Jones  has 
100  B/C  on  hand,  he  is  ^^long"  100  bales. 

Spot  Cotton  or  Spots. — Denote  about  the  same  thing 
as  *'long'';  in  the  preceding,  Jones  is  ''long"  100 


Basic  Cotton  Calculations  193 

bales,  that  is,  he  has  100  bales  of  ' '  spot  cotton ' '  in  his 
possession. 

Short,  Short  Cotton,  Shorts. — This  term  implies 
that  the  seller  of  cotton  has  sold  it  before  getting  it 
in  his  possession,  and  has  ''  sold  short''  or  ^'sold  the 
market  short. ' ' 

Short  sellers  make  their  money  by  a  decline  in  the 
market. 

Those  dealing  on  the  '^ short  side,"  who  sell  cotton 
they  do  not  own,  are  called  * 'shorts." 

Short  sellers  sometimes  find  the  market  does  not 
decline  as  anticipated,  but  instead  either  remains  the 
same  or  advances,  if  so,  in  the  former  case  they  make 
no  gain,  in  the  latter  they  suffer  a  loss. 

Short  sellers  make  money  by  the  market  declining, 
and  lose  when  it  ddvances. 

Bear,  Bears. — Those  who  sell  *' short,"  desire,  and 
exert  an  effort  to  make  the  market  decline,  in  so  do- 
ing their  exertions  are  to  bear  (press)  it  down,  hence 
the  term  ''bear."  Those  operating  on  the  short  side 
of  the  market — those  who  try  to  press  the  price  down 
— -are  designated  as  "Bears." 

Bull,  Bulls. — A  class  of  dealers  whose  operations 
are  exactly  opposite  to  those  of  a  "bear."  A  dealer 
possessing  spot  cotton,  or  contracts,  which  he  has 
bought  at  a  price  he  thinks  cheap,  wishes  an  ad- 
vance, exerts  his  influence  to  secure  it,  which  action 
is  to  lift  up  (bull)  the  price,  hence  the  name  "Bull." 

Those  operating  on  the  bull  side — ^those  trying  to 
advance  the  price  of  cotton — are  termed  "Bulls." 

Bulls  make  money  by  the  market  advancing;  lose 
it  on  declines. 

Bulls  selling  cotton  at  prices  satisfactory  to  them- 

13 


194  The  American  Cotton  System 

selves,  after  so  doing  and  wishing  to  buy  again,  de- 
sire to  buy  at  a  cheaper  basis  if  possible,  in  such  in- 
stances they  become  bears,  and  vice  versa. 

Briefly,  bears  are  those  who  want  and  try  to  make 
the  market  go  down;  bulls  are  those  who  want  and 
try  to  make  the  market  go  up. 

Point. — One  one-hundredth  (tw)  of  a  cent. 

Market  Opens. — The  first  figures  that  are  chalked 
(put  in  figures  on  a  blackboard)  in  the  Cotton  Ex- 
changes at  beginning  of  the  day's  business. 

Market  Closes. — The  last  figures  that  are  placed  on 
the  boards  in  the  Exchanges  for  the  day's  official  quo-, 
tations. 

Futures,  Future  Sales. — Contracting  to  sell  cotton 
to  be  delivered  at  some  future  time.  The  term  is  ap- 
plied to  deals  in  which  contracts  are  dealt  in,  instead 
of  actual  cotton.  Contracts  are  dealt  in  as  one  would 
deal  in  stocks,  bonds,  notes,  mortgages,  etc.,  with  the 
exception,  that  contracts  bought  or  sold  through  the 
Cotton  Exchanges  are  often  settled  for  by  the  con- 
tracting parties  paying  a  margin  to  settle  the  con- 
tract.    No  indorsement  for  transference  is  necessary. 

Sales  or  purchase  of  contracts  for  future  delivery 
are  dealt  in  only  by  the  New  York  and  New  Orleans 
Cotton  Exchanges,  but  contracts  for  either  the  sale 
or  purchase  of  spot  cotton  are  often  made  between 
parties,  none  of  whom  are  members  of  any  exchange, 
and  such  contracts  are  not  subject  to  any  exchange 
rule.  The  governing  features  of  such  transactions 
are  the  mutual  agreements  of  the  contracting  parties. 

Contract Sf  Agreements. — Agreeme*nt  between  two 
or  more  parties  to  perform  certain  stipulated  acts. 

As  reference  to  dealings  in  cotton,  they  may  be 


Basic  Cotton  Calculations  195 

two-fold ;  they  may  refer  to  deals  between  individuals 
or  corporations  who  execute  contracts  to  sell  and  de- 
liver, and  buy  and  receive  cotton,  one  from  the  other ; 
they  may  have  reference  to  Cotton  Exchange  con- 
tracts which  are  dealt  in  as  commodities,  and  cotton 
may  or  may  not  be  used  as  ba^is  of  settlement,  but  if 
not,  liquidated  by  payment  of  margins. 

Margins. — (1)  Payments  required  to  make  pur- 
chase of  contracts,  to  maintain  them  after  purchase, 
or  to  satisfy  their  requirements  at  or  before  maturity. 
(2)  The  difference  between  the  price  paid  and  re- 
ceived for  cotton.  If  cotton  be  bought  for  8%  cents 
and  sold  for  8,  the  marginal  difference  is  one-half 
cent  loss;  if  bought  for  8  cents  and  sold  for  8I/2,  the 
gain  is  V2  cent  margin.  (3)  The  difference  between 
the  price  of  spot  cotton  and  that  of  futures. 

Violent  fluctuations  sometimes  occur  in  the  markets, 
when  so,  it  is  not  unusual  for  brokers  to  demand  the 
payment  of  $5.00  margin  per  bale  or  more,  as  a  pro- 
tection to  themselves  against  loss.  In  the  ordinary 
course  of  events,  the  usual  margin  demanded  is  $1.00 
per  bale.  Both  parties  to  a  marginal  contract  reserve 
the  right  to  call  for  a  margin. 

If  Jones  buys  100  bales  of  August  futures  and 
the  market  advances  20  points,  he  may  call  for  this 
advance,  equivalent  to  100  dollars  profit  to  himself, 
surrender  his  contract  and  the  transaction  is  settled; 
should  the  market  decline  20  points  (100  dollars)  he 
will  be  called  upon  to  re-margin  (pay  another  hun- 
dred dollars),  if  not  paid  his  contract  is  canceled  and 
the  broker  keeps  the  100  dollars  first  paid. 

Premiums. —  (1)  The  profit  offered  by  a  buyer  to 
a  seller  as  an  inducement  to  secure  a  lot  of  cotton. 


196  The  American  Cotton  System 

If  the  basis  price  of  middling  cotton  is  10  cents,  and 
a  cotton  merchant  has  500  bales  for  sale  of  even  run- 
ning grades,  a  buyer  might  offer  a  premium  of  A  or 
14  dhove,  that  is  to  say,  lOy^  or  10^/4  for  such  a  list 
of  cotton.  (2)  The  grades  of  cotton  recognized  as 
better  in  quality  than  middling,  have  values  higher 
than  such  a  grade  and  these  values  above  middling  are 
known  as  premium  values. 

Discounts. — (1)  The  difference  between  the  price 
of  spots  and  futures.  If  the  price  of  spot  cotton  in 
New  York  is  9.65,  in  March,  and  the  quotations  for 
May  cotton  is  9.33  then  the  discount  of  the  May  op- 
tion under  March  spots  is  32  points.  (2)  Middling 
being  the  basis,  the  grades  under  it  are  more  inferior 
in  quality  with  a  corresponding  depreciation  in  value, 
these  differences  for  the  comparative  lower  grades  are 
the  discounts  for  such  character  of  cotton  off  the  mid- 
dling value.  (3)  Cotton  merchants  selling  cotton 
for  future  delivery,  in  some  instances  protect  the  sale 
by  buying  futures  for  the  same  number  of  bales. 

If  Anderson  &  Smith  sell  5,000  bales  of  cotton  in 
August  to  be  delivered  in  September,  October  and 
November,  at  10  cents  at  the  ship^s  side  in  New  Or- 
leans, if  at  the  time  of  this  sale  August  cotton  is  worth 
9.80  as  the  publicly  quoted  value,  and  October  is 
quoted  at  9.50,*  the  merchant's  sale  is  made  at  a 
premium  of  20  points,  and  he  buys  5,000  Octobers  at 
9.50,  he  gets  them  at  50  points  discount  from  price  _ 
of  the  sale. 

In  this  sale  Anderson  &  Smith  have  '^sold  short'' 


♦Owing  to  heavy  freights,  marine  insurance,  exchange, 
etc.,  sales  are  effected  at  60,  90,  or,  perhaps,  120  points, 
on  some  future  month. 


Basic  Cotton  Calculations  197 

5,000  bales — have  sold  5,000  bales  when  perhaps  they 
did  not  have  one,  and  at  a  time,  perhaps,  when  the 
cotton  could  not  be  bought  in  their  territory — and  as 
they  did  not  know  what  the  price  of  cotton  would  be 
in  the  delivery  months,  they  sought  to  hedge  them- 
selves and  secure  protection  by  buying  contracts  from 
some  member  of  the  New  Orleans  Cotton  Exchange, 
maturing  in  the  months  for  delivery. 

Parity f  Equal  Values. — If  middling  cotton  is  quoted 
in  New  Orleans  at  9.80  for  spots,  and  30  points  were 
necessary  as  a  freight  charge  to  put  it  in  New  York, 
30  added  to  9.80  would  give  par  value  in  New  York 
as  10.10. 

If  March  cotton  is  quoted  at  9.75,  and  May  futures 
at  9.60,  the  difference  in  parity  existing  between  the 
two  months,  is  15  points. 

If  March  cotton  is  quoted  at  9.75  in  the  month  of 
March,  and  middling  spots  for  the  same  month  at 
9.85,  the  difference  in  parity  for  spots  and  futures 
for  the  same  month  is  10  points. 

Hedge y  Hedging. — To  protect  one's  purchase  or  sale 
of  cotton;  to  accomplish  which,  requires  the  neces- 
sity of  resorting  to  the  New  York  or  New  Orleans 
Cotton  Exchanges  (in  America)  securing  from  the 
one  or  the  other  a  contract  for  some  designated  future 
month,  covering  the  same  number  of  bales  in  the  con- 
tract as  represent  the  number  of  bales  of  spot  cotton. 
A  contract  bought  in  one  month  may  be  hedged  (pro- 
tected) by  selling  a  contract  in  another  month,  one 
to  entirely  offset  the  other  must  be  of  like  character 
and  equivalent  value,  that  is  to  say,  if  the  first  con- 
tract bought  stipulates  100  bales  of  May  cotton,  the 
same  may  be  hedged  by  selling  100  bales  of  July; 


198  The  American  Cotton  System 

were  a  loss  to  occur  on  the  May  contract,  an  equal 
gain  should  accrue  on  the  July  sale.* 

Straddles  or  Spreads. — Mean  the  purchase  and  sale 
of  one  month  against  another  in  any  of  the  New  Or- 
leans, New  York  or  Liverpool  markets.** 

Scalpers. — Those  who  mediate  between  sellers  and 
buyers  and  act  in  the  capacity  of  both  buyers  and  sell- 
ers themselves,  but  not  recognized  as  regular  dealers 
who  cater  to  the  trade. 

Splits. — Those  grades  of  cotton  that  can  not  be 
classed  as  full  types  of  half  grades  (stricts),  and 
known  to  the  trade  as  quarter  grades,  designated  by 
the  exchanges  as  *' fully''  and  ''barely." 

A  good  style  of  low  middling  cotton,  not  sufficient 
in  character  to  be  classed  as  strict  low  middling, 
would  be  known  as  fully  low  middling. 

Some  buyers  of  spot  cotton,  and  since  the  first  of 
January,  1908,  the  New  York  Cotton  Exchange,  do 
not  recognize  these  grades. 

Flat  Cotton. — The  original  bale  of  cotton  as  it 
comes  from  the  press  before  compressing.  Transpor- 
tation companies  prefer  for  economic  reasons,  to  han- 
dle cotton  in  compressed  form  and  have  it  compressed 
at  their  expense,  if  not  otherwise  instructed.  Con- 
ditions sometimes  require  that  cotton  be  shipped 
''flat"  (without  compressing),  and  if  so,  the  words 
"To  be  shipped  flat"  or  "Ship  flat"  must  be  so  ex- 
pressed in  the  Bill  of  Lading. 

Shippers  Order,  Notify. — These  words  must  be  on 
the  face  of  a  B/L  where  the  shipper  desires  to  draw 


♦See  Discounts,  Anderson  &  Smith,  p.  196. 
**See  Hedging,  sale  and  purchase  of  contracts. 


Basic  Cotton  Calculations  199 

through  his  local  bank  for  the  full  or  part  value 
of  his  cotton  before  it  reaches  destination.  If  so  word- 
ed, the  shipper  has  a  legal  advantage,  and  the  bank 
can  protect  itself.  The  local  bank,  with  the  B/L, 
Sight  Draft  and  Invoice,  forwards  them  to  some  bank 
at  point  of  destination  of  shipment,  with  instructions 
to  deliver  the  B/L  to  consignee  (the  party  to  whom 
the  cotton  is  shipped),  when  the  consignee  pays  the 
money  to  the  bank  for  the  cotton  at  destination,  the 
bank  in  turn  surrenders  the  B/L  to  the  consignee 
and  notifies  the  transportation  company — this  being 
the  order  of  the  shipper.  The  shipper  must  indorse 
on  the  back  of  the  B/L  the  name  of  the  shipper.  If 
Williams  &  Smith  are  the  shippers,  their  names  must 
appear  on  the  B/L;  if  the  shipper  is  an  individual, 
then  his  name.  The  B/L  is  indorsed  over  to  the  bank 
making  the  collection,  as  one  would  indorse  a  note  or 
bank  check  to  another.  This  authorizes  the  bank  to 
make  the  collection. 

The  bank  at  destination  collects  the  money  from 
the  consignee  and  surrenders  to  him  the  B/L,  and 
forwards  the  money  to  the  bank  which  took  care  of 
the  shipment,  which  money  is  credited  to  the  individ- 
ual or  firm  making  the  sale  of  cotton. 

Where  cotton  merchants  or  factors  as  consignees  are 
known  to  be  men  of  undoubted  financial  ability,  it  is 
not  unusual  for  banks  to  allow  credit  to  the  cotton 
shipper  for  the  amount  of  the  draft  on  the  cotton, 
after  the  B/L  is  properly  signed  by  the  railroad  agent 
and  indorsed  by  the  shipper,  before  collecting  the 
money  from  the  consignee. 

If  J.  H.  Hicks  ships  50  B/C  from  Talledega,  Ala., 


200  The  American  Cotton  System 

to  W.  B.  Thompson  &  Co.,  New  Orleans,  La.,  drawing 
through  the  local  bank  at  Talladega  for  $2,500,  this 
being  the  value  of  the  cotton  at  time  of  shipment,  and 
allow  Mr.  Hicks  credit  for  the  full  amount  of  the 
draft.  The  bank  allowing  this  credit  to  Mr.  Hicks 
,is  equivalent  to  Mr.  Hick's  putting  $2,500  in  the  bank 
in  cash  instead  of  the  draft. 

This  is  supposing  the  Talladega  bank  recognizes 
W.  B.  Thompson  &  Co.  as  perfectly  reliable,  other- 
wise the  draft  would  be  received  for  collection  only 
and  Mr.  Hicks  would  be  given  credit  for  it  when  col- 
lected. 

Factors,  Cotton  Factors. — Those  interested  in  the 
cotton  trade  who  do  not  buy  cotton  direct,  but  in- 
stead, receive  from  and  sell  for  others,  who  consign 
cotton  to  them  to  be  sold.  As  commission  merchants, 
they  usually  make  a  charge  for  their  services  based 
on  a  small  percentage  of  the  amount  of  business 
handled. 

Broker,  Brokerage. — Dealers  buying  and  selling 
cotton,  or  dealing  in  contracts,  for  account  of  others, 
are  termed  Brokers.  A  charge  for  both  buying  and 
selling  is  usually  made  when  the  transactions  are 
completed,  based  on  a  certain  per  cent  of  the  value 
of  the  property.  Brokers  of  the  New  York  and  New 
Orleans  Cotton  Exchanges  make  a  minimum  charge 
of  seven  dollars  and  fifty  cents,  for  buying,  and  the 
same  charge  for  selling,  each  100  bales,  that  is,  fifteen 
dollars  for  the  *' round  turn.''  This  amount  of  com- 
mission applies  on  business  done  for  those  who  are 
not  members  of  the  exchanges,  that  is  to  say,  ^*  out- 
side business. ' '    A  commission  of  half  this  amount  is 


Basic  Cotton  Calculations  201 

charged  for  one  member  acting  in  capacity  of  broker 
for  another.* 

The  brokerage  on  deals  consummated  through  the 
medium  of  the  Exchange,  applies  to  transactions  af- 
fecting the  sale  or  purchase  of  contracts  specifying  not 
less  than  100  bales  of  cotton. 

Some  members  deal  only  in  contract  cotton,  others 
in  spots,  and  still  others  in  both  futures  and  spot 
cotton.  The  commission,  based  on  percentage,  is  called 
hrokerage. 

EeclamatioTis. — Claims  made  for  shortage  in  weight, 
class,  or  deviation  in  cotton  from  sample.  Should  a 
shipment  of  cotton  prove  at  destination  to  be  short  in 
weight  100  pounds,  and  had  the  consignee  paid  full 
value  for  the  shipment,  on  receipt  of  the  invoice  and 
B/L  before  its  arrival,  it  is  clear  that  he  would  have 
paid  for  100  pounds  too  much,  in  such  case  he  would 
reclaim  from  the  shipper  the  value  of  the  100  pounds. 
Equally  so,  when  the  classification  on  the  out-turn 
shows  not  to  be  as  high  as  stated  in  the  invoice,  or  if 
cotton  be  bought  on  sample,  and  it  shows  on  arrival 
not  to  come  up  fully  to  the  sample  in  quality,  then  in 
both  instances  reclamations  would  be  made  on  the 
seller  for  the  value  of  differences  in  class  and  varia- 
tion in  the  cotton  from  the  sample. 

Invoice. — The  bill  or  statement  that  describes  in 
detail  the  shipment  of  cotton ;  generally  sent  through 
the  mail  with  the  draft  and  B/L,  and  precedes  the 
arrival  of  the  cotton.  It  shows  its  date,  number  and 
weight  of  each  bale,  total  weight  of  all,  sometimes  its 
classification,   and  full  value  when   payment  is  re- 


♦Members    often    operate    for    one    another    without 
charge. 


202  The  American  Cotton  System 

quested  before  the  arrival  of  the  cotton  at  destina- 
tion. 

Draft. — An  order  from  one  person  on  another  for 
the  payment  of  money — a  bill  of  exchange.  Such  or- 
ders or  drafts  are  usually  handled  through  the  banks. 
The  seller  of  the  cotton  after  making  up  his  invoice, 
will  make  out  his  draft  for  the  amount  of  it,  place  it 
in  the  hands  of  his  local  banker  with  instruction  to 
collect  for  the  full  value,  or  in  some  instances,  a  part 
of  it.  It  is  sometimes  written  payable  *^at  sight,'' 
that  is,  payable  when  presented,  or  at  20,  30,  or  60 
days  sight.  Drafts  in  payment  for  domestic  cotton 
are  usually  payable  at  sight,  while  those  drawn  cov- 
ering cotton  for  export,  stipulate  60,  90,  and  in  some 
instances,  120  days  or  more. 

Exporters  making  drafts  on  their  cotton  on  w^hich 
payment  will  be  made  in  60  or  90  days,  often  avail 
the  cash  on  them  through  their  local  or  some  other 
bank  by  selling  exchange  to  cover  their  shipment. 
Some  banks  make  a  specialty  of  dealing  in  exchange 
on  foreign  commercial  financial  centers. 

Bill  of  Lading. — Virtually  a  receipt  from  a  trans- 
portation company  acknowledging  the  receipt  of  some- 
thing to  be  shipped.  It  describes  the  character  of  the 
shipment,  condition,  date  received,  from  and  to  whom 
shipped,  holding  the  company  responsible  to  deliver 
at  destination,  barring  certain  contingencies,  in  like 
order  received.  All  BiUs  of  Lading  are  signed  by  the 
company's  lawful  agents,  and  are  usually  made  out 
in  triplicate  form.  One  copy  (the  original)  for  the 
shipper,  one  to  be  filed  in  the  company's  office  as  its 
record,  and  one  copy  to  the  freight  car  conductor,  if 
the  shipment  is  made  via  a  railway  company. 


Basic  Cotton  Calculations  203 

The  customary  procedure  in  preparing  the  papers 
for  a  cotton  shipment  from  initial  points  is:  Make 
up  the  invoice,  draw  a  draft  (as  one  would  write  a 
bank  check),  have  the  railroad  agent  sign  his  name  to 
the  B/L,  for  his  company,  which  he  does  after  the  cot- 
ton is  on  the  railway  platform,  or  in  possession  of  the 
company,  when  he  will  give  to  the  shipper  the  orig- 
inal; with  these  three  papers — invoice,  sight  draft, 
and  B/L — the  shipper  presents  them  to  the  bank  with 
instructions  how  to  handle  the  shipment,  the  bank  in 
turn,  writes  a  letter  to  some  bank  or  banker,  at  or 
near  the  point  of  destination  of  the  shipment,  to  this 
letter  he  pins  all  three  papers,  and  forwards  in  one 
envelope.  Upon  receipt  of  the  papers  the  receiving 
bank  has  full  instructions  how  to  proceed.  Ordinarily 
it  presents  the  draft,  with  the  other  papers  to  the 
consignee,  collects  the  money,  surrenders  all  papers, 
and  returns  the  money  to  the  bank  at  shipment  point. 

Shippers  often  send  invoice  direct  to  the  buyers, 
reserving  only  the  draft  and  B/L  to  go  through  the 
banks. 

For  such  character  of  business,  banks  make  a  small 
charge  to  compensate  them  for  their  services,  usually 
calculated  as  a  percentage  on  the  amount  involved,  the 
rate  usually  being  determined  by  the  demand  for  ex- 
change. 

Through  Bill  of  Lading.— To  facilitate  the  opera- 
tion of  handling  cotton  from  loading  point  to  destina- 
tion, the  Through  Bill  of  Lading  was  devised. 

Large  railroad  interests  combining  into  systems, 
these  in  turn  effecting  transportation  arrangements 
with  steamship  companies,  constructed  a  through  bill 


204  The  American  Cotton  System 

of  lading  recognized  by  all  concerned  in  International 
traffic. 

Such  transportation  receipts  covering  shipments  for 
foreign  account,  usually  read  to  '* shipper's  order''  or 
to  the  order  of  some  person  who  must  indorse  the  bill 
of  lading,  so  that  it  becomes  at  once  a  negotiable 
draft. 

Under  its  reading  shipments  can  be  made  direct 
from  interior  points  in  the  South  to  foreign  ports, 
no  longer  necessitating  rebilling  at  the  ports  receiv- 
ing the  export  shipment. 

Port  Bills  of  Lading, — Shipments  of  cotton  for 
German  destination  are  sometimes  protected  by  Port 
Bills  of  Lading  in  the  absence  of  Through  Bills  of 
Lading. 

By  means  of  such  Bills  the  whole  shipment  is  re- 
ceipted for,  yet  it  may  go  out  by  several  vessels,  and 
when  so  billed,  **is  classed  or  arbitrated,  and  invoiced 
separately." 

Shipments  originating  at  interior  American  towns, 
moving  on  one  Through  Bill  of  Lading,  arriving  in 
several  vessels,  are  treated  as  *^  forming  one  ship- 
ment. ' ' 

Arbitrators,  Arbitration, — ^Parties  designated  by 
two  or  more  in  controversy,  as  mediators  to  amicably 
adjust  their  alleged  differences  regarding  the  charac- 
ter of  cotton  delivered  on  contract.  Arbitration,  the 
hearing  and  determining  of  a  cause  by  parties  in  con- 
troversy, by  a  person  or  persons  chosen  for  the  pur- 
pose. 

The  Arbitration  Committee  of  the  New  Orleans  Cot- 
ton Exchange  is  composed  of  nine  members  appointed 


Basic  Cotton  Calculations  205 

annually  by  the  Board  of  Directors.  Its  duties  are 
to  hear  claims  of  members  against  each  other,  con- 
cerning transactions  in  ''spot,  future  contracts  and 
free  on  board  cotton."  This  committee  has  the  set- 
tlement of  all  such  claims,  except  those  in  which  the 
question  of  classification  of  cotton  is  involved,  in 
which  case  the  matter  is  determined  ''by  a  committee 
or  committees  of  experts/'  N.  0.  Cotton  Exchange 
arbitrators  are.  allowed  a  fee  of  $5  for  the  adjustment 
of  each  case.  The  Arbitration  Committee  of  the  New 
York  Cotton  Exchange  is  composed  of  seven  members, 
whose  offices  and  functions  are  similar  to  the  New 
Orleans  Arbitration  Committee.  Its  committee  is  paid 
a  like  fee  as  that  allowed  to  the  New  Orleans  mem- 
bers. These  committees  adjust  differences  concern- 
ing cotton  delivered  on  Exchange  contract. 

Dealers  handling  spot  cotton  often  settle  their  own 
controversies  by  the  selection  of  their  own  arbitrators, 
through  mutual  agreement,  and  whose  determination 
in  the  matter  is  final;  such  arbitrators  are  not  amen- 
able to  the  rules  of  any  exchange. 

REQUISITES    FOR    CALCULATIONS. 

In  figuring  cotton  on  basic  classification  it  is  neces- 
sary to  know  the  different  grades  of  cotton,  also  the 
letters,  figures  and  characters  representing  those 
grades. 

Having  learned  in  previous  articles  the  value  of 
the  cent,  half  cent,  points,  etc.,  the  following  prob- 
lems are  stated  and  solved  on  the  assumption  that  the 
student  is  conversant  with  their  full  meaning,  and  is 


206  The  American  Cotton  System 

prepared  to  accept  shorter  methods  of  cotton  calcula- 
tions. 

For  clearness,  the  grades  are  again  given  with  their 
corresponding  numbers,  letters  and  characters. 

The  Cotton  Exchanges  now  recognizing  eighteen 
grades  of  cotton,  these  numbers  and  more  will  be  used 
in  this  work. 

It  is  immaterial  the  number  of  grades  to  be  con- 
sidered, as  the  principle  for  calculating  any  number 
of  them  is  the  same. 

For  practical  purposes,  it  is  thought  advisable  to 
make  calculations  in  which  a  larger  number  of  grades 
are  shown. 

Any  one  who  has  mastered  the  theory  and  prin- 
ciple of  solving  any  number  of  grades,  can  readily 
calculate  the  9  grades  to  be  established  by  the  United 
States  government  as  its  standard  types. 

GRADES,   characters  AND  INITIALiS. 

The  following  grades  will  be  used  for  the  purpose 
of  calculation: 


Basic  Cotton  Calculations  207 

Character 

and  Grade  Name.  Initials. 

Number. 

a  Fair p 

b  Strict  middling  fair S.  M.  F. 

c  Middling  fair M.  F. 

d  Strict  good  middling S.  G.  M. 

1  Good  middling G.  M. 

2  Strict  middling S.  M. 

3  Middling M. 

4  Strict  low  middling S.  L.  M. 

5  Low  middling L.  M. 

6  Strict  good  ordinary S.  G.  0. 

7  Good  ordinary G.  0. 

8  Strict  low  ordinary S.  L.  0. 

9  Low  ordinary .L.  0. 

d-t  Strict  good  middling  tinged.  S.  G.  M.  T. 

1-t  Good  middling  tinged G.  M.  T. 

2-t  Strict  middling  tinged S.  M.  T. 

3-t  Middling  tinged M.  T. 

4-t  Strict  low  middling  tinged S.  L.  M.  T. 

5-t  Low  middling  tinged L.  M.  T. 

3-s  Middling  stained M.  S. 

The  characters  here  used  to  represent  the  different 
grades  are  adopted  for  sake  of  convenience.  Buyers 
do  not  all  use  the  same  symbols  to  indicate  the  grades 
— some  use  numbers,  some  letters,  some  characters  of 
their  own  devising,  but  all  are  used  for  brevity  in 
correspondence,  making  calculations,  etc. 

All  basic  calculations  require  the  use  of  the  M. 
grade  as  the  base. 

All  grades  showing  a  better  class  than  M.  receive 


208  The  American  Cotton  System 

premium  or  better  prices,  and  the  premiums  are  said 
to  be  so  much  *  *  on "  M. ;  and  those  grades  inferior  to 
M.,  bear  discounts  from  the  M.  price  and  at  different 
discounts  as  so  much  ^^off." 

The  grade,  good  middling  tinged  (G.  M.  T.)  has 
ordinarily,  the  same  value  as  M.  white  cotton,  and  is 
so  recognized  in  this  work. 

There  being  no  definite  difference  to  be  taken  off  M. 
cotton  for  tinges  and  stains,  these  differences  being 
governed  in  the  main  by  the  determination  of  the 
buyer  of  spot  cotton;  values  of  differences  for  these 
colored  cottons  will  be  calculated  at  a  stated  value  in 
problems  showing  such  character  of  cotton. 

A  large  percentage  of  arithmetical  problems  are 
solved  by  the  unit  or  analytical  method;  by  tenths, 
or  decimal  plan;  by  the  100  or  percentage  manner  or 
by  twelfths  or  duodecimal  way. 

In  making  cotton  calculations  the  sixteenth  or  6^ 
point  method  is  used  in  this  work,  and  should  be 
thoroughly  mastered,  as  fully  90  per  cent  of  all  cot- 
ton calculations  requiring  the  average  grade  are  de- 
termined in  this  way. 

Cotton  quotations  and  prices  being  often  in  eighths, 
quarters  and  halves  represented  as  multiples  of  the 
^^  basis,  regardless  as  to  whether  the  grades  to  be  cal- 
culated are  above  or  below  M. 

TO    FIND,  THE    TOTAL   VALUE    OF    COTTON 

WHEN    DIFFERENT    PRICES    FOR 

DIFFERENT  GRADES  ARE  GIVEN. 

For  convenience  take  the  five  grades : 
(1)  G.  M.,  (2)  St.  M.,  (3)  M.,  (4)  St.  L.  M.,  (5) 
L.  M. 


Basic  Cotton  Calculations  200 

If  the  price  of  each  grade  is  known,  and  the  weight 
corresponding  to  the  price,  it  is  very  easy  to  ascer- 
tain its  value,  by  multiplying  the  price  by  the  weight ; 
if  several  weights,  the  value  of  each  will  be  calculated 
separately,  and  these  different  amounts  added,  the 
sum  of  which  shows  the  total  value;  from  this  pro- 
cedure the  following  rule  is  adduced. 

Rule  I. — Multiply  the  weights  of  the  cotton  of  the 
different  grades,  by  the  price  of  these  respective 
grades,  and  add  the  products  of  these  different  multi- 
plicatimis,  the  sum  of  which  will  he  the  total  value. 

Note. — To  accelerate  the  work  it  is  frequently 
easier  to  perform  the  multiplication  by  multiplying 
weight  by  price. 

PEOBLBMS. 

Ex.  1.    Find  the  value  of  1  M.  B/C  520  lbs.  weight 

at  10  cents  a  lb. 

Ans.  $52.00. 

Ex.  2.  A  farmer  sold  2  B/C  which  classed  M.  and 
S.  M.;  for  the  M.  he  received  10  and  for  the  other 
1014  cents  a  pound;  what  is  the  value  of  both,  if  the 
M.  weighed  500  and  the  other  520  pounds? 

Ans.  $103.30. 

Note. — Apply  the  rule. 
Explanation : 

500  x10c    =$  50.00 

520x101/46=    53.30 


Total  value  =$103.30 
Note.— Should  any  difficulty  arise  as  to  multiply- 
inir  by  the  %,  change  it  to  a  decimal,  .25,  and  multiply 


14 


210  The  American  Cotton  System 

the  520  lbs.  by  .1025  and  point  off  4  decimals  in  the 
answer. 

Ex.  3.  Johnson  sold  3  B/C;  1  M.  548  lbs.  at  10 
cents,  1  St.  L.  M.  520  lbs.  at  9%  cents,  1  L.  M.  580 
lbs.  at  9  cents.    What  is  their  total  value  ? 

Ans.  $157.70. 
Note. — The  %  cents  are  equal  to  75  points : 
Decimal  equivalent  $  .0075 

Nine  cents  equal  .09 


Then  nine  and  %  cents  =$  .0975 
Multiply  $  .0975X520=  value  of  this  bale. 
Ex.  4.    Find  the  value  of  7  G.  M.  B/C  3620  lbs.  at 
101/2,  5  S.  M.  B/C  2600  lbs.  at  IO14,  4  M.  B/C  2250 
lbs.  at  10,  3  S.  L.  M.  B/C  1650  lbs.  at  9%,  1  L.  M. 
B/C  560  lbs.  at  9. 

Ans.  $922.00. 

Suggestion. — If  preferred,  convert  the  fractions  %, 
1/2,  and  %  into  decimals  equalling  .0025,  .0050,  .0075, 
that  is,  25,  50,  and  75  points,  and  when  so  used,  point 
off  4  decimals  in  the  answer,  otherwise  only  2. 

Ex.  5.  Tom  Smith  had  his  cotton  graded  by  2 
cotton  buyers,  one  said  it  was  a  S.  M.  and  G.  M.  ; 
the  other  said  2  S.  M.  He  sold  to  the  first  buyer  who 
allowed  %  on  S.  M.  for  G.  M.  The  weight  of  the 
S.  M.  was  560,  the  other  580  pounds.  What  did  he 
gain  by  selling  to  the  first  buyer? 

Ans.  Gain,  $1.45. 

Note. —  (1)  It  makes  no  difference  in  this  problem 
what  the  basic  price  is,  for  the  G.  M.  was  ^4  above 
that  of  S.  M. — assuming,  however,  that  M.  was  9%, 
S.  M.  10,  then  G.  M.  wa^  101/4. 


Basic  Cotton  Calculations  2H 

Explanation : 

(1)  580Xl0y4=(G.  M.)     $  59.45 

560X10    =(S.  M.)         56.00 


Total  value  of  the  first  offer  $115.45 

580X10=$  58.00 
560X10=    56.00 


Total  value  of  second  offer  $114.00 


Gain  by  selling  to  first  classer  $    1.45 

(2)     580X%   (.0025)   =$1.45. 

Note. — (2)  The  gain  was  on  1  bale  only.  To  mul- 
iply  the  i/4  (difference  in  price)  by  the  weight  gives 
he  gain  on  1  bale. 

Ex.  6.  What  is  the  difference  in  value  between  4 
3/C,  2640  pounds  at  8^^  and  8y\  cents  a  pound? 

Ans.  $1.65. 

Ex.  7.  Mr.  Williams  noted  that  quotations  for  L. 
^.  cotton  were  %  off  M.,  but  when  he  offered  his  12 
)ales,  the  buyer  stated  the  difference  was  1^/4  off; 
vhat  did  Mr.  Williams  lose  by  reason  of  this  change 
n  low  grade  differences?  His  cotton  weighed  6,480 
)ounds. 

Ans.  Lost  $32.40. 
Explanation : 

1^4   off  equals  125  points 
%   off  equals     75  points 


Difference     50 
50  points  equal  %  cent. 
6,480  pounds  at  1/2  cent  a  pound  =$32.40. 


212  The  American  Cotton  System 

Ex.  8.  A  grower  knowing  the  price  of  cotton  to 
be  8l^  cents  M/B,  took  15  bales  to  market,  but  be- 
fore arriving  the  market  declined  12  points.  The  cot- 
ton weighed  7,860  pounds;  what  was  his  loss  on  the 
decline  ? 

Ans.  Lost  $9.43+. 
Explanation : 
(1)   The  81/2  cents  =  $  .0850 
The    12  cents  =  $  .0012 


The  price  now  =  $  .0838  =  (eight  thirty-eight) 
Find  value  at  81/2.  • 

Find  value  at  8.38. 
The  difference  will  be  the  loss. 

(2)     Find  weight  of  each  bale. 

Multiply  its  weight  by  the  12  points,  this  equals 
loss  on  each  bale. 

Multiply  this  loss  by  the  number  of  bales,  the  pro- 
duct will  be  the  total  loss. 

Ex.  9.  Had  the  market  advanced  20  points,  what 
would  have  been  the  gain  to  the  grower  in  Ex.  8? 

Ans.  $15.72. 

Ex.  10.    Find  value  of  2  G.  M.  B/C  1160  pounds  at 

9.871/2,  3  S.  M.  B/C  1648  pounds  at  9.621/2,  5  M.  B/C 

2824  pounds  at  93/8,  2  L.  M.  B/C  1000  pounds  at  8%. 

Ans.  $624.17. 
Note. — The  87i/^  and  6214  are  %  and  %  respective- 
ly; the  four  different  prices  are  then,  dV^.  9%,  9%, 
and  8%.     See  table  for  eighths  and  points. 

Ex.  11.  What  can  I  get  for  5  B/C,  weights  being 
522,  518,  547,  560  and  503  lbs.  each,  if  price  is  7| 
cents  ? 

Ans.  $196.10. 


Basic  Cotton  Calculations  213 

•  Note. — One-fifth  of  a  cent  equals  2  mills  equals  20 
points;  two-fifths  equals  twice  one-fifth  equals  4 
mills  equals  40  points.  Decimally,  then,  the  price  is 
7.40   (seven  forty), 

Ex.  12.  I  have  1  G.  M.  B/C,  580  pounds,  and,  1 
L.  M.  580  pounds.  The  G.  M.  is  worth  81/2  and  the 
L.  M.  714 ;  what  is  the  difference  in  the  value  of  the 
2  bales? 

Ans.  $7.25. 

Ex.  13.  I  had  1  B/C,  G.  M.,  weight  560,  picked 
before  a  rain  and  ''ginned  dry";  another  S.  L.  M., 
552,  ''picked  and  ginned  damp";  the  former  worth 
7.80,  the  latter  7.05;  what  did  I  lose  by  not  waiting 
for  the  second  bale  to  dry? 

Ans.  $4.66+. 

Ex.  14.  A  cotton  merchant  bought  100  B/C  after 
nightfall  by  telephone;  when  the  market  came  in 
next  day  it  was  up  15  points;  what  was  the  mer- 
chant 's  gain  on  each  500  pounds  B/C  ? 

Ans.  75  cents. 

Ex.  15.  If  this  lot  of  cotton  averaged  520  lbs.  to 
the  bale,  what  was  the  merchant's  gain  on  the  trans- 
action ? 

Ans.  $78.00. 

Explanation : 

1  bale  520  lbs.  X 15  points  (=$  .0015)  =78  cents. 

If  gain  on  1  bale  is  78  cents  100  bales  are  100  X 
78  cents  =  $78.00. 

Ex.  16.     M.  cotton  being  worth  7%,  what  can  I 

get  for  1  G.  M.  T.,  560  lbs.,  and  1  G.  0.,  540  lbs.,  with 

250  off  for  the  G.  O.? 

Ans.  $70,351/0. 


214  The  American  Cotton  System  ^ 

Statement.— G.    M.    T.    being    M.    value    =7%= 
$  .07625= 

.07625—250  points  =.05125=  ( 51/3 ) . 
560X7%=  value  G.  M.  T. 
540X5y8=value  G.  0. 
Note.— $  .07625=eents,  7% 
Less     .0250  points 


Leave     .05125=5%  cents.     (See  Table  points  and 
eighths.) 


TO  FIND  THE  AVERAGE  PRICE  WHEN  THE 

DIFFERENT   PRICES   AND   GRADES   ARE 

GIVEN,     AND    WEIGHTS     OF     THE 

BALES  THE  SAME. 

It  is  not  unusual  for  buyers  in  making  bids  on 
cotton  to  say,  ^*I'll  give  you  so  and  so  all  round  for 
this  lot  of  cotton. '' 

If  the  seller  can  ascertain  the  grades  of  his  cotton, 
how  much  ''on''  and  ''off"  for  the  different  grades, 
and  knows  how  to  calculate  the  averages,  he  can  read- 
ily know  when  the  buyer  is  making  an  offer  of  full 
value  for  it. 

PROBLEMS — FIRST  PROCESS. 

Ex.  1.  Smith  had  2  B/C  weighing  500  lbs.  each; 
for  the  S.  M.  he  wa^  offered  IO14  and  for  the  M.  10 
cents  a  pound;  what  was  the  average  price? 

Ans.  10%  cents. 


Basic  Cotton  Calculations  215 

Explanation :  Where  the  weights  of  the  bales  are 
the  same,  the  average  is  readily  found  by  adding  the 
different  prices  and  dividing  by  the  number  of  bales; 
thus: 

1  bale  at  lOi/4+l  bale  at  10=2  bales  at  2014. 
Operation :    20l^-^-2= 

2)  2014 


lOYg  average. 
From  the  explanation,  we  can  easily  form  a  rule. 

Rule  2. — Where  the  weights  of  the  hales  are  the 
same,  add  the  different  prices  for  the  different  grades^ 
and  divide  hy  the  number  of  hales,  the  restdt  will  he 
the  average  price.     (First  process.) 

Ex.  2.    Find  average  price  of  4  B/C. 
1  G.   M.        at  83/4  cents  =$  .087500,  500  lbs. 
1  S.   M.        at  81/2  cents  =    .085000,  500  lbs. 
1  M.  at  814  cents  =    .082500,  500  lbs. 

1  S.  L.  M.  at  7H  cents  =    .079375,  500  lbs. 


4  $  .334375 

By  the  rule  divide  .334375  by  4= 
4). 334375 


.083593+ 

As  the  division  will  not  be  exact,  for  practical  pur- 
poses, the  average  price  may  be  stated  as  .0836+ 
(eight  thirty-six)  [8.36]  ;  the  93  at  end  of  the  division 
being  so  near  100,  it  is  taken  as  1  to  be  added  to  the 
5, — this  93  representing  only  the  ninety-three  mil- 
lionth of  a  dollar. 


216  The  American  Cotton  System 

Ex.  3.  Find  the  average  price  of  4  B/C ;  1  G.  M., 
1  S.  M.,  1  M.,  1  L.  M.  the  weights  of  the  bales  being 
400  lbs.  each.  M.  10,  S.  M.  10%,  G.  M.  lOi/o,  L.  M. 
914  cents. 

Explanation : 

1  bale  101^=1025 

1  bale  10y2=.105 

1  bale  10     =.10 

1  bale  914=0925 


4  .4000 

4). 4000 


.1000 


By  the  rule  the  average  price  is  10  cents. 

To  find  the  average  price  in  the  examples  under 
this  rule,  the  weights  of  the  bales  are  of  no  import- 
ance, unless  exactly  similar. 

Prove  the  correctness  of  the  average  by  solving 

Ex.  4.  What  will  be  the  value  of  4  B/C;  1  bale, 
400  pounds,  at  .101/2 ;  1  bale,  400  pounds,  at  .IO14 ;  1 
bale,  400  pounds,  at  .10;  1  bale,  400  pounds,  at  .091/4? 

Ans.  $160.00. 
Explanation : 

400  lbs.  at  .101/2=$  42.00 
400  lbs.  at  .1014=  41.00 
400  lbs.  at  .10  =  40.00 
400  lbs.  at  .0914=     37.00 


1600  lbs.  at  =$160.00 

1600  lbs.  at  10c  average  =  $160.00 ;  proof. 


Basic  Cotton  Calculations  217 

TO  FIND  THE  AVERAGE  PRICE,  WHEN  THE 

WEIGHTS     AND     PRICES    OF    THE 

BALES  ARE  DIFFERENT,  AND 

BOTH     WEIGHTS     AND    . 

GRADES  ARE  GIVEN. 

It  is  so  unusual  for  the  weights  of  the  bales  to  be 
the  same  that  different  calculations  from  the  preced- 
ing must  be  had  to  ascertain  an  average  price  where 
different. 

PROBLEMS — SECOND  PROCESS. 

Rule  3. — Ary^ange  the  hales,  grades,  weights  and 
prices  in  columns;  placing  hales  under  haleSf  grades 
under  grades,  weights  under  weights,  prices  under 
prices.  Find  the  value  of  the  different  grades  sep- 
arately hy  multiplying  the  weight  of  each  grade  htj 
its  price,  and  place  the  amount  opposite  its  graat\ 
which  will  form  a  column  for  the  values  of  the  dif- 
ferent grades.  Add  these  values,  divide  the  sum  hy 
the  total  numher  of  pounds,  the  quotient  will  he  the 
average  price. 

Note. — Where  the  M.  price  only  is  given,  with  the 
statement  that  so  many  sixteenths,  eighths  or  quar- 
ters are  added  as  premiums  on  the  better  grades  and 
similar  relative  differences  or  discounts  off  for  the 
inferior  ones,  find  the  value  of  each  grade  by  adding 
the  premiums  for  the  different  grades  to  M.  price  and 
deducting  the  discounts  from  it. 

After  ascertaining  the  grade  price,  proceed  as  stated 
in  the  rule. 

When  the  totals  of  all  the  values  show  dollars  and 
cents,  reduce  them  to  cents  by  multiplying  by  100, 


218  The  American  Cotton  System 

the  number  of  cents  in  a  dollar,  the  product  will  he 
in  cents. 

The  result  of  the  operation  of  rule  2  (second  pro- 
cess), is  absolutely  correct. 

Ex.  1.  Let  it  be  required  to  find  the  average  price 
1  M.  and  1  S.  M.  bale  of  cotton,  of  520  and  560 
pounds  each.  M.  is  worth  10  and  S.  M.  10^/4  cents 
a  pound. 

Explanation :  Price 

1  bale    560  pounds  at  10i/i=$57.40 
1  bale    520  pounds  at  10      =  52.00 


Total  weights  1080         Total  value  $109.40 

109.40X100=10940  cents.  Divide  the  cents  by  the 
weight,  1080  pounds. 

109.40-f-1080=1012|f  cents  as,  average  price. 

Note. — To  prove  this  work,  multiply  the  weight 
(1080  lbs.)  by  the  price  (1012|f  cts.). 

It  would  be  manifestly  incorrect  to  add  the  two 
prices,  10  and  IO14  cents,  and  divide  by  the  number 
of  bales,  as  the  result  would  be  IOI2-2V  cents  as  the 
average  price  as  shown  in  the  former  process,  which 
is  evidently  not  correct,  and  is  caused  by  the  inequal- 
ity of  the  weights  of  the  bales. 

If  the  weights  of  the  bales  were  equal,  then  Rule  2, 
First  Process,  would  apply. 

Ex.  2.  Try  the  problem  again  by  assuming  the  M. 
to  weigh  560  and  S.  M.  520,  prices  remaining  the 
same. 

1  bale     520  at  10i4=$53.30 
1  bale     560  at  10    =  56.00 


Total  weights  1080  $109.30 


Basic  Cotton  Calculations  219 

109.30X100=10930  cts. 
10930-f-1080=10122V  cents  =10.12, l. 
In  performing  this  division,  the  process  is  the  same 
as  for  that  in  Example  1: 

1080)10930.00(10.12 
1080 

1300 
1080 


2200 
2160 

40 


-27 


1080 

It  will  be  noted  that  after  consuming  all  the  figures 
in  the  dividend  (10930)  that  an  additional  naught 
is  added  twice  in  order  to  carry  the  division  to  4 
decimal  places  in  the  quotient  to  get  the  result  to 
points  and  fraction  of  them.  The  ttftt  ^s  a  remainder 
is  reduced  to  its  lowest  term,  equalling  -^\,  The  an- 
swer may  be  read,  ten,  twelve  and  one  twenty-seventh, 
and  pointed  off  as  shown. 

Ex.  3.     What  is  the  average  of 

1  M.  586  lbs.  at  10      cents=$  58.60 

1  S.  L.  M.    540  lbs.  at    9%  cents=    52.65 


Total  weight    1126  Total  value  $111.25 

Ans.  9.88+cts. 
Ex.  4.     Average  this  list: 

2  G.  M.  1120  lbs.  at  8      cts.  =$  89.60 

1  S.  M.     560  lbs.  at  1%  cts.  =    43.40 

2  M.        1000  lbs.  at  IV2  cts.  =    75.00 

Ans.  7.76+cts. 


220  TjEiE  American  Cotton  System 

Ex.  5.  What  should  I  pay  for  this  list  of  cotton 
as  an  average  price? 

,    2  G.  M.  980  lbs.  at  9       cts. 

3  M.  1610  lbs.  at  81/2  cts. 

4  S.  L.  M.  2180  lbs.  at  7%  cts. 
2  L.  M.  1050  lbs.  at  7       cts. 

Ans.  8.03+  cts. 

Ex.  6.  As  an  all  round  price  what  should  a  buyer 
pay  for  15  B/C  at  8  cts.  B/M;  14  up  for  S.  M./  1/0 
up  for  G.  M.,  1^  down  for  S.  L.  M.,  and  100  down 
for  L.  M.  Three  G.  M.  1610;  four  S.  M.  2012;  one 
M.  503;  five  S.  L.  M.  2490;  and  two  L.  M.  1015  lbs., 
respectively  ? 

Ans.  7.95+  cts. 

Note. — In  making  this  calculation,  start  from  the 
M.  price,  8  cts.,  to  which  add  14  for  S.  M.,  which  is 
814 ;  add  1/2  to  M.  for  G.  M.,  equals  81/2 ;  14  off  M. 
equals  7%  for  S.  L.  M.,  and  from  M.  price  take  1  cent 
off — 1  cent  equals  100  points — leaving  7  cts.  for  L.  M. 

Ex.  7.  C  is  offered  10.30  for  1  S.  M.  B/C,  536 
lbs.,  and  10.05  for  1  M.  520  lbs,  or  10.15  as  an  average 
price.  He  sold  for  10.15;  did  he  gain  or  lose  by 
accepting  this,  and  how  much? 

Ans.     Lost  28%  cts. 

Note. — Find  the  average  price,  and  if  10.15  is  more, 
he  gained,  if  less,  he  lost. 

Ex.  8.  Mr.  Baum  sold  1  G.  M.  bale,  496  lbs.  at 
1014  cents;  and  2  M.  bales,  512  and  528  lbs.  each,  at 
9.80;  what  did  he  get  for  this  cotton,  and  what  was 
the  average  price? 

Ans.     Received  $152.76;  average,  9.94+  cts. 

,Ex.  9.    Average:    3  S.  G.  M.  1640  lbs.,  2  S.  M.  1080 


Basic  Cotton  Calculations      221 

lbs.,  2  S.  L.  M.  992  lbs.,  1  L.  M.  576  lbs.,  2  S.  G  0 
1120  lbs. 

B/M  5  cents,  %  on  for  S.  G.  M.,  1/2  on  for  G.  M., 
14  on  for  S.  M.,  %  off  for  S.  L.  M.,  125  off  for  L.  M., 
and  200  for  S.  G.  0. 

Ans.  4.62+  cts. 
1  Note. — See  note  to,  and  solve  as  problem  6. 

Ex.  10.  Find  the  average  for  this  list  of  cotton, 
M/B  9  cents. 

1  M.  F.  520  lbs.  150  on,  2  S.  G.  M.  1040  lbs.  100  on, 
3  S.  M.  1560  lbs.  3/8  on,  8  M.  4160  lbs.  nothing  on  nor 
off— passed,  5  S.  L.  M.  2600  lbs.  %  off,  1  L.  M.  520 
lbs.  100  off,  2  S.  G.  0.  1040  lbs.  200  off,  10  S.  M.  T. 
5200  lbs.  10  off,  9  S.  L.  M.  T.  4680  lbs.  75  off,  7  L.  M. 
T.  3640  lbs.  125  off,  2  M.  S.  1040  lbs.  50  off. 

Ans.  8.6OV0  cts. 


TO  FIND  THE  AVERAGE  PRICE  WHEN  THE 

NUMBER  AND  CLASS  OF  EACH  BALE  ARE 

GIVEN  BUT  NOT  THE  WEIGHTS. 

THIRD   PROCESS. 

The  following  rule  illustrates  one  of  the  short 
methods  of  finding  the  average  price  where  the 
weights  of  the  bales  are  unknown. 

The  average  thus  found  is  not  accurate,  but  ap- 
proximates very  closely. 

Rule  4. — Specify  the  numbers  7'epresenting  the 
hales  as  that  many  pounds;  multiplying  the  numbers 
of  the  different  bales  by  the  grade  price  of  the  bales: 
add  flic  products,  and  divide  their  sum  by  the  stim  of 


222  The  American  Cotton  System 

■  the  numbers  of  the  bales,  the  quotient  will  be   the 
average  price,  nearly. 

Ex.  1.    Find  the  average  price  of  1  M.  B/C  at  10 
cents,  and  1  S.  M.  B/C  at  IO14  cents. 
Explanation : 

Bale         Price 

1     X     101/4    =  $  .1025 

1     X     10        =  .1000 


Number  of  bales  2      Sum  of  prices  divided  by  2). 2025 


Average  price  $  .1012% 
$  .10121/2=10.121/2  or  lOi/s  cts. 
(See  example  1  under  Rule  2.) 
Ex.  2.     Find  the  average  of  2  G.  M.  at  8  cents,  1 
S.  M.  at  7%  cents,  2  M.  at  71/2  cents. 

Ans.  7.75  cts. 
Explanation  : 

2X8        =  $  .16 

1  X     734    =  .0775 

2  X     71/2     =  .15 


Total    5      Sum  of  prices      $  .3875 
$  .3875   divided  by  5=       5). 3875 

Average  price     $  .0775 

(See  example  4  under  Rule  3.) 

Note  l.-^This  is  usually  read  7.75  (seven  seventy- 
five),  that  is,  7  cents  and  %  of  a  cent. 

2.  In  this  and  problem  1,  the  numbers  of  the  bales 
are  recognized  as  that  many  pounds.  Example  2, 
if  1  pound  G.  M.  cotton  is  worth  8  cents,  2  pounds 
are  worth  twice  8  cents  =  16  cents;  2  pounds  M. 


Basic  Cotton  Calculations  223 

cotton  at  71/2  cents  a  pound  equal  15  cents,  etc.  Add- 
ing the  prices  of  all  the  bales,  gives  38%  cents  for 
5  pounds  of  cotton ;  if  5  pounds  are  worth  38%  cents, 
1  pound  is  worth  ^  of  that  amount  =  7%  cents. 

Finding  the  averages  of  different  ingredients  whose 
prices  are  not  the  same  are  exemplified  under  Alli- 
gation Medial;  the  principles  of  Eule  4  here  given, 
show  its  application  in  averaging  cotton  prices. 

Ex.  3.  What  should  I  pay  as  an  average  price 
for  1  G.  M.  at  9  cents,  3  M.  at  81/2  cents,  4  S.  L.  M. 
at  7%  cents,  2  L.  M.  at  7  cents? 

Ans.  8.04+  cts. 
(See  problem  5,  Rule  3.) 

Ex.  4.  Find  the  average  of  this  list  of  cotton ;  M/B 
81/4  cents:  2  S.  M.  at  81/2  cents,  5  M.  at  814  cents, 
7  L.  M.  at  714  cents,  3  S.  G.  0.  at  6i/4  cents. 

Ans.  7.51+  cts. 
Ex.  5.  Mr.  Johnson  classed  his  own  cotton  as  3 
G.  M.,  1  S.  M.,  5  M.,  and  1  S.  L.  M.;  when  he  sold 
it  the  buyer  classed  it  1  G.  M.,  2  S.  M.,  3  M.,  1  S. 
L.  M.  and  2  L.  M. ;  how  many  points  difference  in 
the  grades? 

M.  is  worth  10  cents,  l^  and  1/2  on  for  S.  M.  and 
G.  M.,  -1%-  and  100  off  for  S.  L.  M.  and  L.  M. 
Explanation :    Mr.  Johnson's  class : 
3  G.   M.        101/2=$  .315 
1  S.  M.         1014=    .1025 
5  M.  10    =    .5000 

1  S.  L.  M.      9H=    .096875 

10  10)1.014375 

$  .1014375=.101iVJts. 
His  average  price  is  .lOlyV  cts. 


224  The  American  Cotton  System 

The  buyer's  class: 

2  G.  M.  101/2=$  .21 

2  S.  M.  1014=     .2050 

3  M.  10    =     .3000 

1  S.  L.  M.     9V^6=    .096875 

2  L.  M.  9     =     .18 


10  bales  Divide  by  10)  .991875 


.0991875=  099  ^ 
His  average  price  is  .099^  cts. 

Johnson's  class      =$  .1014375 
Buyer's  class         =     .0991875 


Difference  in  class  =$  .0022500=221/2  points. 

Note. — This  difference  of  22^  points  is  equivalent 
to  1121/2  cents  value  on  a  bale  of  500  lbs.,  and  on  10 
bales,  ten  times  112i4=:$11.25. 

If  the  buyer  classed  the  cotton  correctly,  Mr.  John- 
son overclassed  his  cotton  by  $11.25  too  much.  If 
Mr.  Johnson  was  correct,  the  buyer  classed  it  too 
low,  and  caused  Mr.  Johnson  to  lose  $11.25. 

This  certainly  emphasizes  the  necessity  of  each  and 
every  cotton  grower's  acquainting  himself  with  his 
own  products  that  he  may  be  able  to  determine  with 
some  degree  of  accuracy  the  different  grades  of  cot- 
ton grown  by  himself,  and  to  estimate  their  value. 

Ex.  6.  Williams  &  Smith,  Jackson,  Miss.,  shipped 
50  B/C  to  Jones  &  Brown,  New  Orleans,  which  was 
sold  for  11  cts.  B/M  f .  0.  b.  Jackson,  the  weights  and 
grades  being  guaranteed  by  the  shippers,  who  classed 
the  cotton  as  2  S.  G.  M.,  5  G.  M.,  7  S.  M..  10  M.,  15 
S.  L.  M.,  6  L.  M.,  3  S.  G.  0.,  2  G.  M.  T. 


Basic  Cotton  Calculations  225 

The  differences  to  apply  were  S.  M.  ,%,  G.  M.  1/2, 
S.  G.  M.  %  on;  for  S.  L.  M.  i\,  L.  M.  %,  S.  G.  0. 
IV2  off;  G.  M.  T.,  M.  value. 

The  cotton  weighed  26,500  pounds  at  shipping 
point. 

Williams  &  Smith  drew  for  the  full  value  of  their 
cotton  on  the  B/L,  and  their  draft  was  so  honored  on 
presentation  to  consignee  in  New  Orleans. 

The  classification  by  Jones  &  Brown  was,  1  S.  G.  M., 

5  G.  M.,  5  S.  M.,  11  M.,  16  S.  L.  M.,  7  L.  M.,  4 
S.  G.  0.,  1  G.  M.  T. 

The  weights  in  New  Orleans  given  in  the  returns, 
were  26,180  pounds. 

What  amount  of  redamation  will  be  made  by  Jones 

6  Brown? 

Ans.  $55.66+. 


Explanation :    Williams  &  Smith 's  class : 

2  S.  G.  M. 

1134=$  .235 

5  G.  M. 

111/2=    .575 

7  S.  M. 

11||=    .791875 

10  M. 

11    =  1.10 

15  S.  L.  M. 

10H=  1.603125 

6  L.  M. 

1014=    .615 

3  S.  G.  0. 

91/2=     .285 

2  G.  M.  T. 

11^=     .22 

50  bales 

50)5.425000 

Average  price  $  .1085 


226  The  American  Cotton  System 


Jones  &  Brown's  class 

1  S.  G.  M. 

113^=$  .1175 

5  G.  M. 

111/2—    .5750 

5  S.  M. 

lli\=    .565625 

11  M. 

11    =  1.2100 

16  S.  L.  M. 

10il==  1.7100 

7  L.  M. 

1014=    .7175 

4  S.  G.  0. 

91/2=    .3800 

1  G.  M.  T. 

11     =     .1100 

50  bales 

50)5.385625 

Average  price  $  .1077+ 

Shipper^s  average  price  $  .1085 
Buyer's  average  price         .1077 


Difference  $  .0008 

Amount  paid  for      26,500  lbs. 
Amount    received     26,180  lbs. 


Short  320  lbs. 

26,180X8    (points)   =  $20,944 
320X.1085  =     34.72 


Am't  reclaimed  $55,664 

(1)     26500  lbs.  at  10.85=  $2,875,250 

320  lbs.  at  10.85=$34.72 

26180  lbs.  at   (points)  8=  20.944 


Total  paid,  too  much  55.664 


Amount  invoice  in  New  Orleans  $2,819,586 


Basic  Cotton  Calculations  227 

(2)  26500X10.85=$2,875.250 

26180X10.77=  2,819.586 


Amount  overpaid    $      55.664 

The  loss  of  320  lbs.  was  paid  for  at  original  price, 
10.85 ;  the  loss  of  8  points  is  calculated  on  the  weights 
shown  at  New  Orleans,  26,180  lbs. 

Ex.  7.  A  buyer  bought  from  wagons  on  the  streets 
during  the  day  12  M.  at  9.80,  3  G.  M.  at  lOS/g,  6  S. 
L.  M.  9.421/2,  2  L.  M.  8.60,  1  G.  M.  T.  9.80;  what  was 
the  average  paid  for  this  list  of  cotton? 

Ans.  9.68  cts.,  nearly. 

Ex.  8.  If  the  buyer  sold  this  lot  of  cotton  at  6^4 
points  advance,  what  did  he  gain,  the  cotton  averag- 
ing 500  lbs.  to  the  bale  ? 

Ans.  $7.50. 

Ex.  9.    At  what  price  per  pound  did  he  sell  it? 

Ans.  9.7414  cts. 

Ex.  10.  Geo.  Randolph,  a  grower,  was  offered 
8.85  for  his  entire  crop  of  36  B/C  at  Gatesville,  Texas, 
refusing  this  offer,  he  shipped  the  lot  to  a  commission 
merchant  at  Galveston,  Texas. 

The  cotton  was  held  4  months  and  sold  for  10  cts. 
a  pound.  What  did  Mr.  Randolph  gain,  freight  being 
55  cents  per  hundred,  brokerage  $1.00  per  bale  first 
month,  and  30  cents  a  bale  each  month  thereafter, 
not  reckoning  any  interest  on  the  money  for  the 
time? 

The  cotton  weighed  18,720  lbs. 

Ans.  Gain,  $43.92. 


228  The  American  Cotton  System 

Explanation : 
(1)     18720  at  10    cts.  =Selling  price       =$1,872.00 
18720  at  8.85  cts.  =Offered  price    =  1,656.72 


(2) 


'ifference  in  offered  and  s< 

Charges : 
18720  at  55  cts.,  freight 
36  bales,   Com.  $1.00 
36  bales,  30  cts.  each 
1  month  $10.80 
3  months  —3X10.80— 

filing 

< 

10 

8.85 

price  =$ 

^102.96 
36.00 

32.40 

215.28 

Total  charges 

171.36 

Gain 
Selling  price 
Offered  price 

$ 
cts. 
cts. 

43.92 

Difference,  gain  1.15  cts. 
18720  at  1.15=$215.28 
Less  charges  =  171.36 


Gain  =$  43.92 

TO  FIND  THE  AVERAGE  PRICE  WHERE  NUMi 

BER  AND  CLASS  BUT  NOT  WEIGHTS 

OF   EACH  BALE   ARE   GIVEN. 

FOURTH   PROCESS. 

This  is  known  as  the  sixteenth  or  614  point  process. 
To  make  cotton  calculations  involving  its  nse,  quo 
tations  must.be  in  sixteenths  or  multiples  of  it. 


Basic  Cotton  Calculations  229 

Like  the  preceding  or  third  process,  averages  are 
obtained  without  the  use  of  weights,  and  the  result 
is  a  close  approximation. 

For  practical  purposes,  among  all  buyers,  this  pro- 
cess is  used  almost  universally,  as  it  is  brief,  easily 
learned,  and  very  convenient  for  those  buying  and 
selling  in  lots,  after  making  the  classification. 

After  making  the  average,  the  cotton  is  usually 
weighed,  and  the  weights  multiplied  by  the  average 
price  will  give  the  total  amount. 

Consignees  in  giving  account-sales  of  cotton  re- 
ceived by  them  as  purchasers  or  factors,  generally 
multiply  the  total  weights  of  each  grade  by  the  price 
of  each  grade,  and  from  the  sum  of  the  totals,  deduct 
whatever  charges  there  may  be,  remitting  the  bal- 
ance. 

This  operation  is  exemplified  under  Second  Pro- 
cess, Rule  2. 

In  performing  the  operation  under  this  process,  it 
is  more  convenient  to  understand  and  represent  the 
different  grades  by  characters,  letters  or  numbers. 

Let,  for  example,  the  grade 

Fair,  be  represented  by  (full  grade)  a. 

Strict  Mid.  Fair  (one-half  grade)  by  b. 

Mid.  Fair  (full  grade)  by  c. 

St.  Good  M.  (one-half  grade)  by  d. 

Good  M.   (full  grade)   by  1. 

Strict  M.  (one-half  grade)  by  2,  and  so  on.  see  page 
207. 

Rule  5.— 1.  Designate  the  grades  hy  their  charac- 
ter representations,  as,  a,  &,  c;  1,  2,  5,  etc.;  opposite 
each  grade  place  the  number  of  hales  of  that  grade: 


230  The  American  Cotton  System 

multiply  these  mimbers  by  the  number  of  sixteenths 
the  class  shows  to  be  abone  or  below  middling  value; 
add  the  products  of  the  sixteenths  above  and  below 
middling^  separately;  subtract  the  lesser  from  the 
greater  amount^  multiply  the  remainder  by  ^^4^,  divide 
the  product  by  the  number  of  bales;  the  quotient  will 
be  the  number  of  points  to  be  added  to  or  subtracted 
from  the  middling  price. 

2.  If  the  excess  is  above,  add  the  points  to,  if  be- 
low, subtract  from  the  middling  price,  the  result  ivill 
be  the  a/uerage  price,  nearly. 

Ex.  1.  Find  the  average  of  1  M.,  2  S.  M.,  3  L.  M. ; 
M/B  being  10  cents,  %  off  for  S.  M.,  %  off  for  L.  M. 

Arrange  the  work  in  this  way: 
Grades.  Bales    Price.    Sixteenths.  Sixteenths. 

(M.)       3  1  Pass  10  Bales 

(S.L.M.)4  2  93/4        4X2=  8 

(L.M.)    5  3  914      12X3=        36 

6      Added  =  16  44 

44X614=275  points. 
275  divided  by  6=        6)275 


45f    points. 

As  the  sixteenths  are  on  cotton  below  M.  in  value, 
they  must  be  taken  off  M.  price — 

M.  price  is  10  cents  =^1000  points. 
1000—451=  1000 

451 


Average  price  =$  .0954^=9.54J  cts. 


Basic  Cotton  Calculations  231 

Explanation:  In  first  column  the  figures  3,  4  and 
5  represent  the  different  grades ;  the  next  column  the 
bales;  the  next  the  price;  the  next  the  number  of 
sixteenths  each  grade  is  below  M. ;  the  4-sixteenths 
is  multiplied  by  2,  the  number  of  bales  of  that  grade, 
making  8-sixteenths ;  the  12-sixteenths  is  multiplied 
by  3,  the  number  of  bales  of  that  grade,  making  36 
sixteenths,  which  added  to  the  8  gives  44-sixteenths 
below  M.  To  reduce  which  to  points,  the  44-sixteenths 
are  multiplied  by  614  points  (equalling  ^V),  giving 
275  points  for  the  6  bales ;  to  get  the  number  of  points 
for  1  bale,  divide  the  275  by  6,  which  is  equal  to  451 
points  to  be  taken  from  the  M.  price. 

Ex.  2.  Average  the  following:  2  G.  M.  at  8  cts., 
1  S.  M.  at  734  cts.,  2  M.  at  71/2  cts. 

Ans.  7.75  (734)  cents. 

Explanation : 
(Grade.)         (Bales)         (Sixteenths.)       (Sixteenths.) 

1  2         X  8  =        16 

2  IX  4  =4 

3  2  Pass  Sum    =        20 
20X61/4=125  points.     125-:-5(No.  bales)=25  points. 

M.  price  is  $  .0750 

Plus  .0025 


Leaves  average  price  $  .0775=7.75  cents. 

(See  problem  4,  Rule  3,  and  problem  2,  Rule  4.) 

Note.— The  M.  price  is  71/2,  ^4  more  =73^,  then 
from  M.  to  S.  M.  is  1/4  ^ 'up;''  i/i==T*(r  and  is  placed 
as  4  in  the  sixteenths  column ;  from  M.  at  71/2  to  G. 


232  The  American  Cotton  System 

M.  is  %  **up;''  %==i\j  P^t  here  as  8  in  the  sixteenths 
column. 

Two  bales  at  8-sixteenths  =  1  bale  at  16 -sixteenths ; 
one  bale  multiplied  by  4=4-sixteenths ;  both  added  =- 
20-sixteenths,  which  reduced  to  points  by  multiplying 
6y4,  and  dividing  by  the  number  of  bales,  gives  the 
number  of  points  to  be  added  to  M.  price. 

M.  being  the  base  from  which  all  basic  calculations 
are  made,  is  passed  in  making  averages  under  this 
process. 

Ex.  3.  What  should  I  pay  as  an  all  round  price 
for  2  G.  M.  at  9,  3  M.  at  81/2,  4  S.  L.  M.  at  1%  and 
2  L.  M.  at  7  cents? 

Ans.  8.04+  cents. 


Explanation : 

(Class.) 

(Bales.) 

( Sixteenths. ) 

(Sixteenths. 

1 

2         X 

8 

=         16  on 

2 

0 

0 

3 

3  Pass 

4 

4         X 

12 

=        48  off 

5 

2         X 

24 

=        48  off 

11  bales  Total  96 

96—16=80.     80X61/4=500.     500-^11=45^51^. 
M.  81/2  cts.  —451^1  points  =$  .0850 

.0045/, 


Average  price  =$  .0804 /v 

See  problem  5,  Rule  3. 

Note. — 1.  Some  of  the  grades  are  above  M,  and 
some  below,  which  when  reduced  to  sixteenths,  equal 
16-sixteenths  above  M.  value,  and  96  below  that  grade, 


Basic  Cotton  Calculations  233 

taking  one  from  the  other,  leaves  an  excess  of  80- 
sixteenths  below  the  M.  base;  reducing  to  points, 
give  4:5  fi  to  be  taken  from  the  M.  price.  From  M. 
at  81/2  to  S.  L.  M.  at  7%  cents  equals  %  off;  %=\i 
placed  opposite  that  grade  as  12;  from  M.  8V2  to 
L.  M.  at  7  cents  equals  1%  cents  off;  1  cent  off  equals 
16,  V2  cent  off  equals  i\,  16-  and  8-sixteenths  added 
equal  \i,  placed  opposite  that  grade  as  24;  these  2 
numbers,  12  and  24,  multiplied  by  their  grades  oppo- 
site, make  a  total  of  96-sixteenths  for  the  grades  off 
the  M.  price. 

2.  Care  should  be  taken  to  place  points  under 
points  to  make  a  correct  subtraction.  Should  any 
doubt  arise,  consult  the  tables  for  cents,  mills  and 
points. 

Ex.  4.     Average  problem  9,  Rule  3. 


staten: 
Class. 
1 
2 

lent: 
Bales. 

3         X 
2         X 

Sixteenths.     Sixteenths. 
10       =       30 

4     '=         8 

3 

4  . 
5 
6 

Pass 

2         X 

1  X 

2  X 

6 
20 
32 

Total    38  np. 
==        12 
=       20 
=        64 

Total    96  down. 


Follow  the  Rule. 


Ans.  4.63+  cents. 

Ex.  5.     What  should  I  pay  for  a  list  of  cotton,  as 

an  average  price,  in  which  there  are  1  G,  M.,  8  St. 

M.,  10  M.,  22  S.  L.  M.,  25  L.  M.,  10  S.  G.  0.,  5 

S.  L.  M.  T.,  19  G.  0.? 


234  The  American  Cotton  System 

B/M  8I/2,  A  and  j\  up;  A,  100,  150,  A  and  300 
off,  respectively,  in  the  order  named. 

Ans.  7.45+  cts. 
Statement : 

Class.  Bales.  Sixteenths.     Sixteenths. 

1  IX  9=9 

2  8         X  5       =       40 

3  10  Pass  49  up. 


4 

22 

X 

6   = 

=  132 

5 

25 

X 

16   = 

=  400 

6 

10 

X 

24   = 

=  240 

7 

19 

X 

48   = 

=  912 

4t 

5 

X 

8   = 

=   40 

Total    1724  down 

Note.— For  the  grades  L.  M.  100,  S.  G.  0.  150,  and 
G.  0.  300  points  off,  are  represented  in  the  first  six- 
teenths columns,  as  16,  24  and  48,  respectively.  As 
100  is  16-sixteenths,  it  is  given  as  16;  16-sixteenths 
equals  100,  and  8-sixteenths  =50,  then  150=16-1-8=:^ 
24-sixteenths ;  if  150=24-sixteenths,  300=  twice  24- 
sixteenths  =48-sixteenths,  stated  as  48.  Again,  100 
=U,  300=3XU=-!i. 

Ex.  6.  What  would  be  the  price  of  G.  M.  cotton 
at  H'^on,''  if  M.  is  worth  10|  ? 

Ans.  10.901  cts 

(See  tables  for  eighths  and  thirty -seconds^  and  add 
them  decimally.) 

Ex.  7.  Middling  quoted  at  7^4  cents,  what  would 
be  the  value  of  G.  O.  at  325  off? 

Ans.  4  cents. 


Basic  Cotton  Calculations  235 

Note.— The  325  here  means  325  points,  equal  to 
3Vt  cents,  subtracted  from  714=4  cents. 
Decimally    7i/4=$..0725 
325  points        =     .0325 


.04=  cents. 

Often  buyers  speak  of  G.  M.  as  ''goods/'  S.  M.  as 
''stricts/'  S.  L.  M.  as  ''strict  lows/'  L.  M.  as  "lows/' 
or  G.  M.  as  "ones,"  S.  M.  as  "twos,"  M.  as  "threes," 
S.  L.  M.  as  "fours,"  L.  M.  as  "fives,"  S.  G.  0.  as 
"sixes,"  G.  0.  as  "sevens,"  S.  L.  0,  as  "eights,"  and 
L.  0.  as  "nines." 

These  grades  cover  a  very  large  per  cent  of  the 
cotton  and  enter  extensively  into  most  all  cotton  cal- 
culations. 

Ex.  8.  A  gentleman  sold  3  2's,  4  4's,  and  5  6's 
at  8%  M/B;  the  differences  being  i\  up;  iV.,  1% 
down ;  what  was  the  average  price  ? 

Ans.  8.32+  cts. 


Statement 

Class. 

Bales. 

Sixteenths. 

1 

0 

0 

2 

3        X 

5       = 

15  up. 

3 

0  Pass 

4 

4        X 

5       = 

20 

5 

0 

0 

6 

5        X 

20       = 

100 

120  down 

Note.— The  20-sixteenths  =11/4  off. 

100=1^,1/4=^.  n+i\=ii 

Ex.  9.    Solve  by  Rule  4,  Third  Process. 

Ans.  8.32+  cts. 


286  The  American  Cotton  System 

Ex.  10.  Solve  by  Rule  3,  Second  Process,  weights 
of  the  S.  M.  being- 1632,  S.  L.  M.  2208,  and  the  S.  G.  0. 
3120  pounds. 

Ans.  8.29  cts.,  nearly. 

Ex.   11.     What  is  the  difference  in  value  of  tbis 

list  of  cotton  calculated  at  8.29  and  8.32  cts.  a  pound? 

Ans.  $2.08+. 
Ex.  12.  Find  the  average  of  10  ^' Goods,"  5 
^'Stricts,''  5  ''Strict  Lows,"  4  5-t's,  and  1  M.  S. 
Premiums  %  and  %  for  '^Stricts"  and  ''Goods." 
Discounts  ^^e  for  ''Strict  Lows,"  93%  for  5-t's  and 
561/4  for  the  M.  S.    M/B  7  cents. 

Ans.   6.9V[>. 
Statement  and  solution : 

1  10         X  4        =  40 

2  5X2=  10 

50  up 


3 

0  Pass 

4 

5         X 

3 

= 

15 

5-t's 

4         X 

15 

=: 

60 

M.  S. 

1         X 

9 

^=: 

9 

25  bales  84  down. 

84—50=34;   34X61^=212.5 ;   212.5---25=8.5   points. 
M.  price  7  cents  =$  .0700 

Less  81/2  points  =     .OOO8I/2 


Average  $  .0691i4=6.91i/2Cts. 

Ex.  13.  A  number  of  farmers  having  200  B/C 
stored  in  a  cotton  yard,  thinking  the  market  satis- 
factory, offered  the  cotton  for  sale  to  the  highest  bid- 
der, the  highest  being  8  cents  M/B;  the  premiums 
were  for  S.  M.  f^,  G.  M.  /,,  S.  G.  M.  % ;  for  the  lower 


Basic  Cotton  Calculations  287 

grades,  the  discounts  were  for  S.  L.  M.  i\,  L.  M.  %. 
The  quoted  M.  price  for  the  open  market  was  7% ; 
what   was  the   average   price  realized  by  selling  in 
bulk,  the  cotton  weighing  102,000  pounds? 

In  this  list  were  5  ^'St.  Goods,"  55  ^' Goods,''  102 
^^Stricts,"  30  M's  and  8  ^^ Strict  Lows/' 

Ans.  8.30+  cts. 
Statement:    M/B  8  cents. 

12       =        ? 


d 

5        X 

1 

55        X 

2 

102        X 

3 

30  Pass 

4 

8        X 

5  =: 


up. 


5       =  —  down. 

Ex.  14.    How  much  did  the  farmers  gain  by  secur- 
ing a  premium  of  this  %  above  the  market  price  ? 

Ans.  $127.50. 
Ex.  15.    What  was  the  gain  on  each  bale? 

Ans.  63%  cents. 
Ex.  16.  Farmers  combining,  sold  4,000  B/C  for 
themselves,  in  Atlanta,  Ga.,  at  a  premium  of  ,%  above 
the  market.  For  S.  M.,  G.  M.,  and  S.  G.  M.  the 
premiums  were  %,  iV  ^^^  1^0;  ^^^  S-  L.  M.,  L.  M. 
and  S.  G.  0.,  the  discounts  were  ^V,  %  and  150,  re- 
spectively. M.  price  was  lOy^  cents  in  Atlanta;  the 
cotton  weighed  1,960,000  pounds;  there  were  50  S.  G. 
M.,  870  G.  M.,  1,520  S.  M.,  1,260  M.,  205  S.  L.  M., 
70  L.  M.  and  25  S.  G.  0. ;  what  was  the  average 
price;  what  the  gain  on  each  bale;  and  what  the 
whole  gain  to  the  farmers  from  this  co-operative  sale? 

Ans.  Average,  10.80,  nearly. 
Gain  on  bale,  $1,531/8. 
Gain  to  farmers,  $6,125. 


238  The  American  Cotton  System 


statement:  M/B  lOi^e 

cts. 

d       50    X 

16 

1      870    X 

9 

2      1520    X 

6 

3      1260  Pass 

4       205    X 

5 

5       70    X 

14 

6       25    X 

24 

-up. 


down. 


Note. — The  market  price  is  10.25 ;  the  gain  in  class 
is  23.66+  points,  added  to  10.25=10.4866+  cents  as 
the  average  price  at  10.25;  the  market  being  10.25 
and  a  premium  of  ft  (31%  points)  additional  as  a 
plus  amount  to  secure  this  list  of  cotton,  equals  10.25 
+311/4=10.5614,  or  10  ^^  as  the  basis  for  this  sale- 
price.  Now,  10.56%  being*  the  basis  price  and  the 
gain  in  class  being  23.66+  points,  added  to  10.56% 
=10.799+,  or  10.80,  nearly,  as  average  price. 

It  is  not  usual  to  secure  such  premiums  even  on  a 
large  list  of  cotton  as  this,  but  as  the  lot  shows  to  be 
largely  high  grade,  with  a  very  small  percentage  of 
"hard"  cotton,  exceptional  values  were  obtained. 


^     OF    THE 

Of 


CHAPTER  VII. 
CHECKS  AND  DRAFTS. 

Payments  liquidating  claims  for  cotton  so  frequent- 
ly require  large  sums  of  money,  the  handling  of  which 
is  usually  avoided  by  the  use  of  checks  and  drafts. 

Orders  drawn  on  banks,  individual  firms  or  cor- 
porate bodies  for  immediate  payment  of  money  are 
called  Checks. 

The  date,  the  amount,  the  name  of  the  bank,  firm 
or  individual,  and  location,  are  stated  in  the  cheek. 

Checks  are  used  in  payment  of  claims  locally,  gene- 
rally. 

A  written  order  to  an  individual  firm  or  bank  for 
the  payment  of  money  is  called  a  Draft. 

A  draft  made  for  immediate  payment,  is  known  as 
a  Sight  Draft. 

If  its  payment  is  directed  at  some  future  time,  it 
is  designated  as  a  Time  Draft. 

Drafts  made  by  one  bank  upon  another,  are  some- 
times called  Bills  of  Exchange. 

When  a  draft  does  not  sell  for  its  face  value,  the 
exchange  is  made  at  a  Discount. 

When  a  draft  commands  face  value,  its  exchange  is 
said  to  be  at  Par. 

When  a  draft  is  sold  for  more  than  face  value, 
the  exchange  is  made  at  a  Premium. 

Drafts  written  in  one  place  to  be  paid  in  another, 
are  drawn  to  be  paid  at  the  other  place. 

A  person  draws  upon  another,  when  he  writes  the 
draft  to  be  paid. 


240  The  American  Cotton  System 

Drafts  drawn  for  payment  in  any  country  having 
the  same  currency,  are  called  Domestic  Drafts^  and 
the  exchange  is  Domestic  ExcJmnge,  in  contradistinc- 
tion to  drafts  drawn  for  foreign  account. 

Drafts  sometimes  are  not  paid  when  presented,  but 
are  accepted  to  be  paid  in  a  certain  number  of  days, 
when  so  stated,  the  word  ^^  Accepted^ ^  is  written  across 
the  face  of  the  bill,  with  the  signature  of  acceptor, 
date  and  place  of  payment,  if  desired,  usually  writ- 
ten in  red  ink. 

Drafts  are  similar  to  checks,  in  showing  the  amount, 
date,  place  of  the  maker,  the  one  to  whom  the  money 
is  paid,  and  the  remitter. 

There  are  always  three  parties,  and  sometimes  four, 
to  transactions  in  exchange. 

The  Drawer y  the  person  signing  the  draft;  the 
Drawee,  the  person  to  whom  the  draft  is  addressed; 
the  Payee,  the  person  to  be  paid. 

The  payee  may  be  the  one  himself  to  whom  the 
money  is  to  be  paid. 

Note. — For  example,  a  person  in  Atlanta,  Ga.,  wish- 
ing $1,000  paid  to  himself  in  New  York,  may  put 
$1,000  in  the  Atlanta  bank  and  take  exchange  on  New 
York  for  a  similar  sum,  and  receive  $1,000  cash  from 
the  New  York  bank  when  he  arrives. 

EXCHANGE. 

Exchange  is  a  convenient  method  adopted  by  our 
banking  institutions  for  payment  of  sums  of  money  in 
one  place,  of  like  amount  in  another,  without  actual 
necessity  of  transmitting  the  cash.  The  risk  and 
trouble  of  sending  money  is  thus  avoided. 


Checks  and  Drafts  241 

The  Course  of  Exchange  deviates  from  par  accord- 
ing to  the  superabundance  or  deficiency  of  supply  of 
bills  of  exchange  for  sale.  This  variableness  fluctu- 
ates as  trade  relationship  differs  in  character  between 
any  two  places. 

Bills  of  Exchange  are  drafts  drawn  by  one  bank 
upon  another  in  a  different  place. 

Under  the  National  Banking  System,  it  is  usual  for 
banks  to  place  a  portion  of  their  funds  as  credits  in 
other  banks. 

The  banks  receiving  these  credits  are  called  the 
Correspondents  of  the  bank,  or  Reserve  Agents. 

If  a  bank  at  Salem,  Ala.,  has  $200,000  as  de- 
posits, a  portion  of  this  amount  may  be  placed  in  a 
bank  at  New  Orleans;  a  portion  with  Montgomery, 
Atlanta,  St.  Louis,  Chicago  and  New  York  banks  as 
credits  for  the  account  of  the  Selma  bank. 

Let  it  be  understood  that  the  Selma  bank  has  in 
New  Orleans  $20,000 ;  Montgomery,  $10,000 ;  Atlanta, 
$30,000;  St.  Louis,  $30,000;  Chicago,  $20,000;  New 
York,  $50,000,  making  in  the  hands  of  its  Correspond- 
ents, $160,000. 

Parties  in  Selma  desiring  to  pay  certain  sums  of 
money  in  any  of  the  other  cities,  buy  drafts  from  the 
Selma  bank  on  the  other  city,  transmit  the  draft  to 
the  one  to  whom  it  is  payable,  who  in  turn,  upon 
its  receipt  presents  it  to  the  bank  on  which  it  is 
drawn  and  receives  the  money. 

Should  a  person  in  Selma  wish  to  pay  a  bill  for 
merchandise  in  Nashville,  Tenn.,  he  buys  a  draft  from 
the  Selma  bank,  either  on  St.  Louis,  Chicago  or  New 
York,  and  remits  this  draft  (exchange)  on  say,  New 
York:  the  merchant  in  Nashville  receiving  this  New 

16 


242  The  American  Cotton  System 

York  exchange,  gives  the  Selma  drawer  credit  for  its 
face  value,  as  he  can  place  such  a  draft  with  any  local 
Nashville  bank  and  get  its  value  in  money  on  pre- 
sentation, or  a  credit  for  its  sum.  Through  such 
mediums  established  by  the  banking  system,  facilities 
for  exchange  are  broader. 

Buying  and  selling  drafts  of  one  place  on  another 
is  called  buying  and  selling  Exchange. 

Calculations  respecting  exchange  between  one  place 
and  another  involve  the  principles  of  percentage. 

Outside  of  the  banking  channels,  individuals  or 
firms  sometimes  place  money  in  other  places  for  credit, 
or  draw  upon  others,  taking  bank  credits,  which  are 
collected  by  drafts. 

DOMESTIC  EXCHANGE. 
PROBLEMS. 

1.  A  wishes  to  remit  $500  to  New  York,  exchange 
being  ^  of  1  per  cent;  what  is  the  cost  of  the  draft? 

Ans.  $501.25. 

Note. — A  wishes  to  send  $500  to  New  York,  and 
wants  a  bank  to  send  it  for  him.  The  bank  know- 
ing the  rate  of  exchange  to  be  i/i  of  1  per  cent,  agrees 
to  send  the  money  for  $501.25.  A  then  pays  the 
bank  $501.25;  the  bank  writes  a  draft  on  its  cor- 
respondent bank  in  New  York  for  $500,  and  keeps 
the  $1.25 — this  being  the  amount  of  exchange  re- 
ceived for  sending  the  money. 

Explanation : 

(1)     One  cent  is  .0100   (4  decimals). 

14  of  one  cent  is  .0025=2%  mills. 


Checks  and  Drafts  243 

The  bank's  charge,  then,  is  2i^  mills  on  the  dollar, 
=25  cents  on  100  dollars  and  5  times  that  on  500 
dollars  =$1.25. 

(2)     $1.0025X500=$501.25. 

Ex.  2.  A  merchant  in  Waco,  Texas,  wishes  to  pay  a 
debt  of  $1,200  in  St.  Louis;  what  will  be  the  cost  of 
the  draft  at  %%  premium? 

Ans.  $1,201.50. 

Explanation:  %  of  1  per  cent  =$  .00121/2 ;  this 
=121/2  cents  on  100  dollars;  $1,200=1,200 X.OOI21/2 
=$1.50.     $1,200+1.50=$1,201.50.     Ans. 

As  the  rate  is  a  certain  per  cent  on  the  dollar,  by 
adding  the  rate  on  a  dollar  to  it  when  at  a  premium, 
or  subtracting  when  at  discount,  the  dollar  can  be 
used  as  a  base  on  which  to  make  a  rule. 

To  find  the  cost  of  a  draft : 

FOR    SIGHT    DRAFTS. 

Rule. — Add  to  1  dollar  the  rate  of  exchange,  if  at 
premium;  subtract  from  1  dollar  the  rate  of  exchange^ 
if  at  discount;  multiply  the  sum  or  remainder,  ly  the 
face  value  of  the  draft,  the  result  will  he  its  cost, 
including  exchange. 

Ex.  3.  Smith  bought  50  B/C  amounting  to  2620 
dollars.  He  gave  a  check  on  a  local  bank  in  Macon, 
Ga.,  and  protected  the  check  with  a  sight  draft  on 
New  York.  Exchange  being  %%  premium,  what  was 
its  face  value,  and  the  amount  of  exchange? 

Ans.,  Face,  $2,639.65;  Exchange,  $19.65. 

As  this  is  a  sight  draft,  the  premium  of  exchange 
is  the  only  calculation  necessary. 

Explanation:     (1)     %%=$  .0075;  this  being  TVs 


244  The  American  Cotton  System 

mills  on  1  dollar;  $2,620 X. 00075=  cost  of  exchange 
=$19.65.    Ans. 

(2)     By  the  rule:     exchange  being  at  premium, 
add  it  to  1  dollar. 
$1.0000 
.0075 


$1.0075X$2,620=$2,639.65=cost  draft. 
$2,639.65— $2,620=$19.65=  cost  exchange. 
Ex.  4.     A  commission  merchant  sold  60  B/C  for 
$3,300,  after  deducting  his  commission  at  2%%  and 
exchange  at  %%  premium;  what  amount  was  remit- 
ted to  the  owner  of  the  cotton,  in  a  sight  draft  ? 

Ans.  $3,213.48. 
Explanation : 

Proceeds  of  sale  $3,300.00 

21/2%  of  $3,300        =       82.50 


Amount  less  com.        $3,217.50 
Less  Exchange         =         4.02 


Amount  sight  draft     $3,213.48 
The  bank  sending  this  draft,  kept  the  exchange, 

$4.02,  hence  deducted  from  a  portion  of  the  gross 

receipts  of  the  cotton  sale.* 

1/8%  of  $3,217.50=$4.02+.    For  brevity,  point  off 

4  decimals,  =32.1750  and  divide  by  8)32.1750 


4.0218+ 
Ex.  5.    A  merchant  in  Boston  having  sold  a  quan- 
tity of  wool  for  $5,000,  wished  to  remit  this  sum 


*The  exchange  is  calculated  on  the  amount  after  de- 
ducting commission. 


Checks  and  Drafts  245 

to  New  Orleans  to  invest  in  cotton;  exchange  being 
at  1  per  cent  discount,  how  much  should  he  pay  for 
the  draft? 

Ans.  $4,950.49. 

The  usual  mode  of  making  such  computations  is 
to  deduct  1  per  cent  of  $5,000  from  it;  1%  of  $5,000 
=$50;  $5,000— $50=$4,950. 

It  is  evident  the  true  proportion  would  be  $100  in 
Boston  would  =$101  in  New  Orleans,  hence  to  get 
the  result  to  exactness,  divide  $5,000  by  $101= 
$4,950.49. 

Ex.  6.  A  cotton  buyer  deposited  a  draft  on  Chicago 
in  the  bank  at  Oxford,  Miss.,  for  $10,000.  Exchange 
being  %%  premium,  what  was  the  net  amount  to  the 
buyer's  credit  for  cotton  purchases? 

Ans.  $9925.00. 

Ex.  7.  Should  this  buyer,  in  preceding  example, 
wish  $10,000  to  his  credit  for  the  draft,  what  amount 
of  exchange  would  he  be  required  to  pay  at  same  rate 
to  secure  it? 

Ans.  $75.00. 

Ex.  8.  A  cotton  buyer  was  allowed  1  per  cent  com- 
mission for  buying  cotton.  His  first  purchase  being 
100  bales  valued  at  $4,500,  he  wished  to  make  a  draft 
on  Philadelphia,  sufficient  in  amount  to  cover  the 
value  of  the  cotton,  his  commission,  and  exchange,  it 
being   i/4%    premium.     What  was  the   face   of  the 

draft? 

Ans.  $4,556.36. 

Ex.  9.  A  cotton  merchant  in  New  Orleans,  after 
business  hours,  bought  by  telephone,  200  B/C  from 
a  dealer  in  Jackson,  Miss.,  for  which  he  offered  f.  o.  b. 
Jackson    9%   cents   and   pay   the   exchange,   or  9H 


246  The  American  Cotton  System 

cents  a  pound,  and  the  dealer  pay  exchange ;  the 
dealer  accepted  the  latter  proposition;  did  he  gain  or 
lose,  the  cotton  weighing  104,000  pounds,  and  ex- 
change at  14  of  1%? 

Ans.     Dealer  gained  $8.05. 
It  is  not  usual  to  buy  cotton  in  such  manner,  unless 
both  parties  are  acquainted  with  the  grades. 

Ex.  10. 
$3500  Citizens'  National  Bank. 

Flatonia,  Texas. 
At  sight  pay  to  the  order  of  B.  J.  Enroe  Three 
Thousand   Five   Hundred   and  no/joo   Dollars   and 
charge  to  account  of 

Alton  B.  Jones,  Cashier. 
To  National  Park  Bank,  New  York. 

Premium  being  %%,  what  is  the  amount  paid  for 
this  draft? 

Ans.  $3,513.13. 
time  drafts. 

A  bill  not  paid  at  sight,  but  drawn  to  mature  at 
a  stated  time,  after  sight,  is  a  mixed  question  of  ex- 
change and  Bank  Discount. 

Solving  problems  involving  the  use  of  the  two,  re- 
quire the  use  of  the  rules  necessary  for  the  solution 
of  each,  but  into  the  one  computation,  the  two  must 
be  combined. 

Three  days  of  grace  are  usually  allowed  on  time 
drafts  after  the  expiration  of  the  time  specified.* 

The  proceeds  of  a  note,  draft  or  account  constitutes 
the  amount  left  after  deducting  the  bank  discount. 


♦Several  States  have  passed  laws  inimical  to  "days  of 
grace"  in  which  they  are  forbidden. 


Checks  and  Drafts  247 

Bank  Discount  is  simple  interest  on  the  face  of  the 
Note  or  Draft  for  the  time  to  elapse  from  any  given 
date  until  maturity,  therefore  it  is  Simple  Interest  of 
the  face  of  the  Note  or  Draft  paid  in  advance. 

TO    FIND    THE    COST    OP    DRAFTS   PAYABLE    AFTER    SIGHT. 

Rule. — Find  the  proceeds  of  1  dollar  at  bank  dis- 
count for  the  stated  time,  at  the  rate  prescribed,  or 
the  legal  rate,  if  no  rate  is  expressed;  to  this  add  the 
rate  of  exchange  if  at  premium,  or  subtract  if  at  dis- 
count; multiply  the  result  by  the  face  of  the  draft, 

PROBLEMS. 

Ex.  1.  After  buying  100  B/C  valued  at  $5,000,  a 
merchant  in  Savannah  gave  to  the  local  bank  a  draft 
payable  60  days  after  sight  on  New  York,  exchange 
being  %  per  cent  premium,  interest  rate  6  per  cent; 
what  amount  of  credit  would  the  bank  allow  the  mer- 
chant ? 

Ans.  $4,985.00. 

Explanation : 
The  interest  (bank  discount)  on  $1,  63  days  =$.0105 
The  premium  of  exchange  on  $1  at  %%      =  .0075 

The  difference  is  $.0030 

As  the  face  of  the  draft  is  $5,000,  the  bank  will 

deduct  A  of  1  per  cent  =$15,  leaving  $4,985  to  the 

merchant's  credit. 

This   is   a  brief,   clear   way   to   obtain   the   result 

quickly,  and  also  accurately.    Of  course,  the  interest 

is  first  calculated  before  attempting  to  formulate  the 

statement. 


248  The  American  Cotton  System 

By  the  Rule. — Interest  on 

$1   for   63   days  =$  .0105. 

$1—$  .0105=$  .9895. 

$  .9895+$  .0075  (Premium)  =$  .9970. 

$  .9970X$5,000=$4,985. 

To  understand  fully  its  conception,  the  problem 
may  be  stated  as  follows: 

Find  the  Simple  Interest  on  $5,000  for  63  days 
at  6%,  which  =  $52.50 

The  premium  of  exchange  at  a  %%  rate  =  37.50 


Difference  between  premium  and  interest  =$15.00 
which  can  be  deducted  directly  from  the  face  of  the 
draft,  $5,000,  leaving  $4,985. 

Now,  the  bank  discount  on  $5,000  being  $52.50, 
deducted  from  $5,000=:  proceeds  =      ^  $4,947.50 

To  which  add  the  exchange  =  37.50 


Equals  cost  of  draft  $4,985.00 

If  no  interest  were  allowed  on  this  draft  it  would 
cost  the  merchant  $5,037.50. 

Ex.  2.  Sold  320  B/C  for  $17,600 ;  accepted  a  New 
York  draft  at  %  per  cent  discount,  interest  to  accrue 
at  6  per  cent  for  90  days:  I  sold  this  draft  to  my 
Jiome  bank  for  cash ;  what  amount  did  it  pay  me  ? 

Ans.  $17,305.20. 

Ex.  3.  A  Philadelphia  firm  executed  a  30  days 
draft  for  $42,000  at  a  6  per  cent  rate,  on  New  York, 
at  11/2  per  cent  discount ;  what  is  the  cost  of  the  draft  ? 

Ans.  $41,139.00. 

Ex.  4.  Thompson  &  Co.,  (xalveston,  Texas,  sold  a 
list  of  212  bales  of  Farmer '  Union  cotton  at  11  cents, 
it  being  %  above  quotation ;  the  cotton  gained  4  points 


Checks  and  Drafts  249 

in  class,  and  460  lbs.  in  weight.  This  cotton  was  held 
3  months,  on  which  were  charges  of  1  dollar  per 
bale  the  first  month,  and  23  cents  a  bale  each  month 
thereafter.  It  averaged  510  lbs.  to  the  bale.  What 
was  the  amount  of  the  draft  to  cover  payment  of  this 
cotton  after  deducting  charges.  Exchange  being  14 
of  1%.  What  was  the  gain  in  class,  weight  and  quo- 
tation ?* 

Ans.  Amount  s/d,  $11,554.62 ;  gain  in  class,  $43.24 ; 
gain  in  weight,  $50.60 ;  gain  in  quotation,  $135.15. 

Ex.  5.  A  dealer  in  Atlanta,  Ga.,  sold  500  B/C, 
valued  at  $25,850  to  Huggins  &  Co.,  Norfolk,  Va., 
on  whom  he  made  a  draft  60  d/s  at  6%  interest  and 
%%  premium,  they  were  to  pay  the  exchange,  and 
he  accepted  the  draft. 

The  dealer  found  2  days  after  the  cotton  was 
moving  and  he  had  cashed  the  draft  at  the  local 
bank,  that  Huggins  &  Co.  had  failed,  and  could  not 
receive  the  shipment,  he  immediately  diverted  it  to 
Wilson  Cotton  Co.,  Savannah,  Ga.,  to  whom  he  had 
to  sell  for  i\  less,  and  pay  the  exchange  at  the  rate 
of  1/4%  premium  on  a  sight  draft.*  What  was  his 
loss  or  gain  by  the  failure  of  the  Norfolk  firm? 

Ans.  Gained  $45.23+. 

Note. — The  news  of  the  fact  of  the  failurt'  of  Hug- 
gins &  Co.,  voided  the  draft  on  them,  the  value  of 
which  reflected  on  the  bank  cashing  it  for  the  dealer 
previously,  but  as  the  shipment  was  immediately  sold 
to  another,  the  dealer  accepted  the  surrender  of  the 
original  draft  and  issued  a  second  one  on  Savannah, 
protecting  both  himself  and  the  bank. 

In  such  instances  where  shipments  on  a  B/L  prop- 


*Note  this  is  a  sight  draft. 


250  The  American  Cotton  System 

erly  indorsed,  with  the  notation  ** Shipper's  Order, 
Notify,"  on  its  face,  the  bank  and  shipper  are  both 
protected. 

INDIRECT   EXCHANGE. 

Owing  to  the  difference  of  the  rates  of  exchange 
between  any  two  places,  and  the  frequent  variation 
of  it,  it  is  often  advantageous  for  persons  wishing  to 
make  payment  of  any  sum  on  some  other  place  to 
draw  through  one,  two  or  more  intermediate  points. 

By  this  process  of  Circular  Exchange  the  rate  is 
sometimes  cheapened. 

Exchange  of  this  character  is  called  Indirect^  Circu- 
lar or  Arhitrution  of  Exchange. 

PROBLEMS. 

Ex.  1.  A  spinner  buyer  in  Galveston,  having  pur- 
chased $60,000  worth  of  cotton,  for  his  Providence, 
R.  I.,  mills,  knowing  the  rate  of  exchange  on  New 
York  to  be  %%  premium,  found  by  drawing  in- 
directly through  New  Orleans  banks,  he  could  obtain 
a  rate  through  the  latter  place  of  %%  premium,  and 
from  New  Orleans  to  New  York,  a  discount  of  %%; 
he  drew  through  New  Orleans;  what  did  he  save  by 
drawing  through  that  place,  and  what  was  the  amount 
of  his  draft? 

Ans.  $59,999,621/2 
Saved  $300,371/2. 

Explanation : 

(1)     $60,000=  value  of  purchase. 

$1,005=%%  premium  on  1  dollar  on  N.  Y. 

$60,000  X$1.005=$60,300=direct  exchange,  and 
the  amount  of  such  a  draft. 


Checks  and  Drafts  251 

$1.0025=14%  premium  on  1  dollar  on  N.  0. 

$60,000X$1.0025=$60,150=  value  sight  draft  on 
New  Orleans. 

$1.00— 14%=$1.0000— $  .0025=$  .9975. 

$  .9975=  discount  on  $1  from  N.  0.  to  N.  Y. 

$60,150X$  .9975=$59,999.96y2,  indirect  exchange. 
Cost  direct  exchange  $60,300.00 

Cost  indirect  exchange  59,999.62%  Ans. 


Saved  $      300.371/2  Ans. 

(2)     $60,000  in  New  York  =  what  in  Galveston? 
$1,001/2  in  Galveston  =$1.00  in  New  York. 
$1.00%  in  Galveston  =$1.00  in  New  Orleans. 
$  .993/4  in  New  Orleans  =$1.00  in  New  York,  then 
$60,000X$1.00i/2=  value 

draft  in  Galveston     '         $60,300.00 
$60,000X$1.00i4X$  .993/4= 

value  draft  $59,999,621/2  indirect. 


Subtracting,  leaves  gain     $      300.37% 
Ex.    2.     A   Baltimore   manufacturer's   representa- 
tive bought  in  Dallas,  Texas,  a  list  of  cotton  amount- 
ing to  $16,530;  exchange  on  Baltimore  being  14% 
premium,   he   could  by  drawing  indirectly  through 
New  Orleans  and  Havana,  Cuba,  secure  exchange  on 
New  Orleans  at  %%  premium;  from  New  Orleans  to 
Havana  %%   discount;   from  Havana  to  Baltimore 
1/4%  discount.     What  is  the  cost  of  the  draft  each 
way,  and  what  is  the  gain  by  circular  exchange? 
Ans.,  Cost  direct    $16,571.32+ 
Cost  indirect  16,488.65+ 

Gain  $       82.67+ 


252  The  American  Cotton  System 

foreign  exchange. 

People  of  one  nation  doing  business  with  another, 
must  have  some  basic  value  on  which  to  consummate 
financial  transactions. 

This  basis  is  the  mint  valuation  of  the  monetary 
unit  of  the  countries. 

In  Foreign  Exchange  it  is  necessary  to  find  the 
value  of  money  in  one  country  in  terms  of  unit  value 
of  the  other. 

The  amount  of  money  of  one  country  of  equiva- 
lent value  of  the  other  is  called  Far  of  Exchange  be- 
tween these  two  countries. 

This  value  determined  by  the  Director  of  the  Mint 
is  the  Intrinsic  Par  of  Exchange,  while  the  market 
value  of  such  coins  dealt  in  by  the  banks  may  slight- 
ly vary  from  this,  such  bank  valuations  are  called  the 
Commercial  Par  of  Exchange. 

Eemark. — By  virtue  of  an  act  of  Congress,  August 
28,  1894,  the  Director  of  the  Mint,  proclaimed  'Hhe 
values  of  foreign  coins  to  be  values  of  such  coins  in 
terms  of  the  money  of  account  of  the  United  States, 
to  be  followed  in  estimating  the  value  of  all  foreign 
merchandise  exported  to  the  United  States  on  and 
after  April  1,  1909,  expressed  in  any  of  such  metalic 
currencies. ' ' 

Copying  from  United  States  Treasury  Department 
Circvilar  No.  15,  the  subjoined  Table,  for  reference  in 
estimating  moneys  of  foreign  account  is  given. 


Checks  and  Drafts 

Table  No.  7. 

Value  of  Foreign  Coins. 


253 


Country 

Standard 

Monetary  unit 

Value  in  terms  of 
U.  S.  gold  dollar 

Austria  Hungary- 

Gold 

Crown 

$0,203 

Belgium 

Gold 

Franc 

.193 

Brit.  Pos. 

Gold 

DoUar 

1.000 

China* 

Silver 

TaeP* 

.613 

Denmark 

•Gold 

Crown 

.268 

Finland 

Gold 

Mark 

.193 

France 

Gold 

Franc 

.193 

Ger.  Empire 

Gold 

Mark 

.238 

Gr.  Britain 

Gold 

Pound  ster. 

4.866y2 

Italy 

Gold 

Lira 

.193 

Japan, 

Gold 

Yen 

.498 

Mexico 

Gold 

Peso 

.498 

Netherlands 

Gold 

Florin 

.402 

Persia 

Silver 

Kran 

.069 

Portugal 

Gold 

Milreis 

1.080 

Russia 

Gold 

Ruble 

.515 

Spain 

Gold 

Paseta 

.193 

Sweden 

Gold 

Crown 

.268 

Switzerland 

Gold 

Franc 

.193 

Turkey 

Gold 

Piaster 

.044 

The  values  of  the  coins  of  the  countries  to  which 
cotton  is  exported,  are  the  principal  ones  here  given. 

Quotations  giving  exchange  values  for  cotton  in 
German  territory  are  for  four  marks  or  reich's  mark 
to  the  dollar. 


*The  value  of  the  Tael  in  China  has  a  different  valu- 
ation in  each  of  its  National  territorial  divisions— 
the  Tael  in  Amoy  is  $.615;  Cheefoo  $.588;  Hankow 
$.575;  Nankin  $.608,  etc. 

**Canton. 


254  The  American  Cotton  System 

Those  showing  the  French  exchange  quotations  are 
in  five-francs  and  centimes,  or  decimals  of  a  franc. 

Drafts  drawn  for  account  of  cotton  destined  for 
Russian  points,  are  covered  by  sterling  bills  of  ex- 
change on  London,  usually  drawn  at  90  d/s. 

For  Germany,  cotton  shipments  are  protected  by 
drafts  on  German  banks,  while  for  France,  the  stipu- 
lations generally  require  bills  of  exchange  drawn  on 
French  banking  institutions. 

There  are  any  number  of  well  established  banks  in 
enlightened  foreign  countries,  upon  which  spinners 
are  accustomed  to  give  drafts  as  reimbursements. 

The  rates  of  exchange  vary  from  day  to  day,  and 
buyers  of  exchange  on  this  side  are  governed  by  the 
demand  for  it;  by  the  rate  of  discount  in  London, 
Paris  or  Berlin,  or  on  any  country  upon  which  the 
draft  may  be  drawn. 

The  rates  varying  are  for  those  termed  Commercial 
Exchange,  and  may  be  higher,  equal  to,  or  lower  than 
the  Par  of  Exchange.  A  bill  payable  in  sixty  days 
costs  less  than  sight  exchange. 

Calculations  required  for  determining  foreign  ex- 
change valuations  are  for  those  of  commercial  or  quot- 
ed values. 

Bills  of  Exchange  on  England,  Ireland,  Scotland 
are  expressed  in  sterling  money,  called  Sterling  Bills, 
The  denominations  are  in  pounds  (£),  shillings  (s.), 
and  pence  (d)  ;  12d.=ls. ;  20s.=l£=$4.866y2. 

Note. — The  old  custom  house  silver  valuation  for 
the  pound  sterling  was  $4.44f ,  hence,  when  exchange 
between  the  United  States  and  England  is  really  at 
Intrinsic  Par,  $4,866^^,  it  is  at  a  premium  of  9^^  per 
cent  above  the  old  sterling  silver  rate. 


Checks  and  Drafts  255 

Foreign  Bills  of  Exchange  are  drawn  or  issued  in 
triplicate  form,  known  as  First,  Second  and  Third  of 
Exchange,  each  of  which  are  posted  by  different 
mails;  the  first  to  arrive  at  destination  being  vital 
and  paid,  renders  the  others  void. 

The  operation  to  find  the  values  of  moneys  of 
foreign  account  will  show  further  necessity  for  the 
advantage  of  Indirect  Exchange. 

EXCHANGE   ON   ENGLAND. 
PROBLEMS. 

Ex.  1.  What  will  be  the  value  in  dollars  and  cents 
for  a  bill  on  London  for  500  pounds  at  Intrinsic 
Exchange  ? 

Ans.  $2,433.25. 

By  Table  No.  7,  a  £  sterling  is  quoted  at  $4.8661/2, 

then,    £500    would    equal    500X$4.866i/2=$2,433.25, 

Ex.  2.    What  is  the  value  in  U.  S.  money  of  £500, 

bankers'  exchange  quoted  at  $4.85i^? 

Ans.  $2,427.50. 

Ex.  3.     How  much  could  a  cotton  buyer  realize  in 

New  Orleans  for  a  bill  on  I/iverpool  for  £219,  10s.,  6d., 

exchange  being  quoted  at  $4.91i?  ^„^  ...  . 

Ans.  $1,078,111+. 

Note.— Reduce  the  10s.  and  6d.  to  a  decimal  of  a 
pound,  and  proceed  as  in  Example  1. 

Explanation:  12d.=ls.;  20s.=£l.  Multiply  the 
10s.  by  12,  as  12d.=ls.,  which  gives  120d.,  to  this 
add  the  6d.,  making  for  10s.  and  6d.  126d.  Reduc- 
ing 1£  to  pence,  equals  240d.;  now  with  these  2 
numbers  form  the  common  fraction  \H;  annexing 
naughts  to  the  126,  and  dividing  by  240  as  in  division 


256  The  American  Cotton  System 

of  decimals,  the  answer  .525  is  obtained  as  a  decimal 
of  a  pound.  The  statement,  then,  is  £219.525X$4.91i 
=$1,078,111+,  Ans. 

10s.   6d. 

12 

120d. 
6 

126=126d. 

Ex.  4.  A  Manchester  representative  paid  a  Mem- 
phis cotton  merchant  a  draft  for  £600,  16s.  for  a  list 
of  cotton ;  what  is  the  equivalent  value  in  U.  S.  money, 
exchange  being  $4.88? 

Ans.  $2,931,904. 

Ex.  5.  How  much  Federal  money  can  I  get  for  a 
draft  on  London  for  £802,  8s.,  payable  in  60  days, 
when  sterling  exchange  is  quoted  at  $4.85 1? 

Ans.  $3,896.45+. 

Note. — In  this  problem  a  60-day  time  is  stated, 
but  no  interest  rate,  because  the  exchange  rate  is 
allowed  for  60-day  paper,  and  cashed  at  this  valua- 
tion. 

From  the  preceding  examples,  to  find  the  cost  of 
sterling  exchange  in  dollars  and  cents,  it  is  easy  to 
form  a 

Rule. — (1)  Multiply  the  face  of  the  draft  in 
£'s  by  the  stated  exchange  rate  in  dollars  and  cents. 

(2)  Reduce  shillings,  pence  and  farthings  to  a 
decimal  of  a  pound  before  multiplying. 

To  find  the  amount  of  sterling  exchange  that  can  be 
bought  for  a  certain  sum  of  United  States  money, 
reverse  the  operation: 


Checks  and  Drafts  257 

KuLE. — Divide  the  face  of  the  draft  expressed  in 
dollars  and  cents,  hy  the  rate  of  exchange  for  £1. 

Ex:  6.  A  buyer  gave  a  draft  on  London  for  $2,195.- 
475;  if  British  exchange  is  quoted  at  4.86|,  what  is 
its  value  in  £.,  s.,  and  d.  ? 

,   Ans.  £451,  2s.,  6d. 

NpTE. — The  division  gives  a  direct  quotient,  £451.- 
125. 

.125X20  (No.  shillings  in  £1)  =2.500=2s.  and  .5 
of  a  shilling,  which  is  further  reduced  by  multiply- 
ing by  12  (No.  d.  in  a  s.),  giving  a  product  6.0= 
6d. 

EXCHANGE   ON   FRANCE. 

Calculations  to  find  the  equivalent  value  of  French 
moneys  are  similar  to  those  for  English  account. 

Ex.  1.  What  can  I  get  in  U.  S.  money  for  a  bill 
on  Paris  for  38,700  francs,  the  quotation  being  5.16 
fr.  to  1  dollar? 

Ans.  $7,500. 

Explanation :     38,700-^5.16=7,500X$l=$7,500. 

Ex.  2.  I  have  a  90-day  draft  on  Paris  for  53,300 
fr.  for  which  a  banker  offers  to  cash  at  5.121/^ ;  what 
is  its  value  in  U.  S.  money? 

Ans.  $10,400. 

Ex.  3.  A  French  buyer  having  $1,500,  wished  to 
convert  it  into  francs;  what  is  its  value  in  French 
money  if  exchange  on  Paris  is  quoted  at  5.141/^? 

Ans.  7,717.5  fr. 

Explanation:     5.141/2  fr.  X  1,500=7,717.5  fr.  Ans. 

Ex.  4.  I  sold  a  Switzerlander  100  B/C  for  which 
he  gave  me  a  bill  of  exchange  on  Berne  for  33,475  fr. ; 
exchange  on  Switzerland  being  quoted  at  5.15,  what 
amount  of  T^.  S.  money  did  I  get  from  my  local  banker 

17 


258  The  American  Cotton  System 

who  cashed  it  for  %%  premium,  who  in  turn  drew 
indirectly  through  New  York? 

^     Ans.  $6,491,871/2. 
Note. — The  franc  in  Switzerland  is  same  in  value 
as  that  of  France. 

exchange   on   GERMANY. 

Ex.  1.  I  sold  to  a  German  mill  220  B/C,  averaging 
510  lbs.  each,  at  11^/2  cents,  for  which  the  agent  gave 
me  exchange  on  Hamburg  for  its  value  in  marks  at 
.95l^ ;  what  was  the  face  of  the  bill  in  German  money  ? 

Ans.  54,043.97m. 

Explanation :    220X510Xliy2=$12,903. 

12,903--.95y2Xi=54,043.97+  marks. 

To  find  the  value  in  German  money: 

EuLE. — Divide  the  amount  of  money  in  dollars  and 
cents  by  the  exchange  rate;  multiply  the  product  by 
4;  the  answer  tvill  be  in  marks. 

Note. — The  rate  is  quoted  for  four  marks,  and  the 
same  result  can  be  obtained  by  dividing  by  the  cost 
of  1  mark. 

Ex.  2.  What  is  the  value  in  marks  for  a  bill  on 
Berlin  for  $17,526,  90  d/s,  if  offered  exchange  for  it 
at  .9514? 

Ans.  73,600m. 

Ex.  3.  A  German  buyer  gave  me  a  90-day  draft  on 
Berlin  for  73,600  marks  in  payment  for  a  list  of  cot- 
ton, exchange  being  at  .951/4,  what  was  its  worth  in 
U.  S.  money? 

Ans.  $17,526.00. 

Explanation :    73,600  X  .95l^-^4=Ans. 

To  find  value  in  dollars  and  cents : 

EuLE. — Multiply  the  face  of  the  bill  in  marks  by 


Checks  and  Drafts  259 

the  exchange  rate,  and  divide  the  product  by  4;  the 
answer  will  he  in  U,  8,  money, 

Ex.  4.  A  Lancashire  spinner  buyer  wished  to 
pay  $5,000  for  100  B/C  in  Charleston,  and  by  making 
exchange  indirect  through  Paris,  could  get  a  rate  of 
5.30  fr.  for  1  dollar;  from  Paris  to  London  25.40  fr. 
for  £1 ;  for  how  many  pounds,  shilling  and  pence  will 
he  have  to  make  his  draft? 

Ans.  £1,043,  6s.,  1.7d.+. 

Explanation:    $5,000X5.30=26,500  francs. 

26,500-^-25.40=  value  in  £'s  and  decimals  of  a 
pound,  which  reduce  to  s.  and  d. 

Ex.  5.  For  a  sale  of  cotton  made  by  a  Houston  firm, 
it  agreed  to  accept  a  draft  on  London  for  £5,000,  ex- 
change quoted  at  4.88f .  The  firm  found  by  paying  a 
commission  of  i/^%  to  a  Hamburg  agent,  it  could 
draw  through  that  place  indirectly  on  London,  a  mark 
at  Hamburg  equaling  35^2  cents,  and  13^/2  marks 
equaling  £1  sterling,  and  get  a  cheaper  rate.  How 
much  would  this  firm  gain  by  drawing  on  London 
through  Hamburg? 

Ans.  $362.13+. 

Explanation : 
-£5,000X$4.88f =$24,444.44+,  direct. 

£5,000  X  131/2=67,500     marks. 
Add  1/2%  com.      337.5 


67,837.5 
67,837.5X35y2=$24,082.31+,  indirect. 

Cost  direct  exchange         $24,444.44+ 
Cost  indirect  exchange       24,082.31+ 

Gaii^  $     362.13 


260  The  American  Cotton  System 

Ex.  6.  A  buyer  from  the  Hague  wished  to  pay 
$30,000  for  530  B/C  in  Montgomery;  by  drawing 
through  London  and  Hamburg,  exchange  on  London 
being  $4.86=£1;  £1=14  marks  of  Hamburg,  and  6 
marks  =8  florins  of  the  Netherlands;  for  how  many 
florins  will  the  draft  have  to  be  made? 

Ans.  115,226.2  fl. 

Explanation : 

(1)  $30,000-f-$4.86   (£1)  =£6,172.83+. 
£6,172.83X14=86,419.7  marks. 

I  of  86,419.7  m.  =115,226.2  flor.     Ans. 

(2)  AO|o^xYXf=? 


AMERICAN,     GERMAN     AND     FRENCH 

WEIGHTS,  AND  METRIC 

MEASUREMENTS. 

The  standard  of  weights  for  most  all  the  European 
countries  are  based  on  the  Metric  system,  and  cal- 
culations are  made  in  Kilograms ;  for  convenience  and 
brevity,  generally  expressed  as  Kilos  (Keeloze). 

Lengths  for  cotton  staple  are  in  millimeters,  and 
length  and  strength  are  qualifying  considerations  in 
determining  values,  but  not  exclusive  of  other  factors 
that  go  to  make  up  the  grades. 

Millimeters  in  quotations  for  staple  values  are  ab- 
breviated thus — ^m/m. 

A  meter  being  about  39.37  inches,  a  m/m  =1000th 
part  of  it  =.03937  inches,  and  for  practical  pur- 
poses may  be  expressed  as  .04  inches. 

To  determine  the  length  of  cotton  staple  measur- 


Checks  and  Drafts 


261 


ing,  say,  28  m/m,  by  multiplying  by  .04  would  = 
1.12  inches,  an  approximation  close  to  accuracy. 

Quotations  for  staple  cotton  are  given  as  definite 
lengths,  and  those  intermediate,  as  28  m/m;  28/30 
m/m;  29  m/m;  29/30  m/m;  30  m/m;  30/32  m/m 
and  so  forth. 

The  expression  ''28/30,"  means  28  to  30  m/m  in 
length;  that  is  for  cotton  measuring  1.12  to  1.20 
inches,  equal  to  about  1%  to  1^  inches. 

TABLE  No.  8. 
AMERICAN-GERMAN  WEIGHTS. 


Kilos  to  2  decimals.    100  lbs.  =45.35  Kilos. 


Lbs. 

Kilos. 

Lbs. 

Kilos. 

Lbs. 

Kilos. 

1 

0.45 

70 

31.74 

4,000 

1,814. 

2 

0.90 

80 

36.28 

5,000 

2,267.50 

3 

1.36 

90 

40.81 

6,000 

2721. 

4 

1.81 

100 

45.35 

7,000 

3,174.50 

5 

2.26 

150 

68.02 

8,000 

3,628. 

6 

2.72 

200 

90.70 

9,000 

4,081.50 

7 

3.17 

300 

136.05 

10,000 

4,535. 

8 

3.62 

400 

181.40 

20,000 

9070. 

9 

4.08 

500 

226.75 

30,000 

13,605. 

10 

4.53 

600 

272.10 

40,000  18,140. 

15 

6.80 

700 

317.45 

50,000 

22,675. 

20  • 

9.07 

800 

362.80 

60,000  27,210. 

30 

13.60 

900 

408.15 

70.000  31,745. 

40 

18.14 

1,000 

453.50 

80,000  36,280. 

50 

22.67 

2,000 

907. 

90,000  40,815. 

60 

27.21 

3,000 

1,360.50 

100,000  45,350. 

262 


The  American  Cotton  System 


Table  No.  9. 
german-american  weights. 


Lbs.  to  2  decimals.    45.35  Kilos  =100  lbs. 


Kilos. 

Lbs. 

Kilos. 

Lbs. 

Kilos. 

Lbs. 

1/4 

0.55 

50 

110.25 

3,000 

6,615.21 

y2 

1.10 

60 

132.30 

4,000 

8,820.29 

% 

1.65 

70 

154.35 

5,000 

11,025.36 

1 

2.20 

80 

176.40 

6,000 

13,230.43 

2 

4.41 

90 

198.46 

7,000 

15,435.50 

3 

6.61 

100 

220.51 

8,000 

17,640.57 

4 

8.82 

150 

330.76 

9,000 

19,845.64 

5 

11.02 

200 

441.01 

10,000 

22,050.72 

6 

13.23 

300 

661.52 

20,000 

44,101.43 

7 

15.43 

400 

882.03 

30,000 

66.152.15 

8 

17.64 

500 

1,102.54 

40,000 

88,202.87 

9 

19.84 

600 

1,323.04 

50,000 

110,253.58 

10 

22.05 

700 

1,543.55 

60,000 

132,304.30 

15 

33.07 

800 

1,764.06 

70,000 

154,355.02 

20 

44.10 

900 

1,984.56 

80,000 

176,405.73 

30 

66.15 

1,000 

2,205.07 

90,000 

198,456.45 

40 

88.20 

2,000 

4,410.14 

100,000 

220,507.17 

PROBLEMS. 

Ex.  1.     A  man  sold  one  B/C  weighing  522  lbs.; 
what 'is  its  weight  in  Kilos? 

Ans.  234.9  Kilos. 
Explanation : 

(1)     1  lb.  (Table  8)  =.45  Kilos. 
522  lbs.  =522 X. 45=234.9  Kilos.     Ans. 


Checks  and  Drafts  263 

(2)     By  the  Table      2  lbs.  =      .90  Kilos. 

20  lbs.  =    9.07  Kilos. 

500  lbs.  =226.75  Kilos. 


522  lbs.  =236.72  Kilos. 

The  difference  is  caused  by  carrying  the  relative 
value  of  the  Kilo  to  the  lb.  to  only  2  decimal  places. 
The  true  decimal  to  4  places  is  .4535+;  .4535X522= 
236.72+  Kilos. 

Ex.  2.  What  is  the  equivalent  weight  in  Kilos  of 
5  B/C  weighing  respectively,  510,  532,  496,  501,  566 
lbs?    Give  result  by  the  Table. 

Ans.  1,181.37  Kilos. 

Ex.  3.  Bought  from  a  German  13  B/C  which 
weighed  3482  Kilos  at  9.80  cents  a  pound;  what  is 
the  value  of  the  cotton? 

Ans.  $752.44+. 

Note. — Get  weights  in  lbs.  from  Table  9,  and  mul- 
tiply by  the  price. 

Ex.  4.  A  buyer  offered  1  mark  per  Kilo  for  3 
B/C  weighing  685  Kilos ;  what  was  the  value  in  U.  S. 

^^^^y^  Ans.  $163.03. 

Explanation : 

685Xlni.=685m. 

685 X$  .238=$163.03=  Ans. 

Ex.  5.  What  is  the  price  per  pound  U.  S.  money 
in  example  4?  ^^^  ^q  g^  ^^^    nearly. 

Explanation : 

600  Kilos  =  1,323.04  lbs. 

80  Kilos  =      176.40  lbs. 

5  Kilos  =       11.02  lbs. 


685  Kilos  =  1,510.46  lbs. 


264  The  American  Cotton  System 

If  1,510.46  lbs.  cost  $163.03 ;  1  lb.  will  cost  YTilVl^ 
of  $163.03=$163.03-^1,510.40  lbs.  =1080  cents, 
nearly. 

Ex.  6.  I  sold  a  list  of  cotton  weighing  1,260  Kilos, 
which  I  classed  28  m/m  staple,  at  110  pfennigs  per 
Kilo;  the  out  turn  from  this  shipment  showed  the 
cotton  to  grade  30  m/m;  what  did  I  gain  in  dollars 
and  cents  by  this  latter  gradation  if  each  m/m  extra 
length  was  equivalent  to  10  pfennigs  ? 

Ans.  $59,976. 

Explanation : 

1,260  Kilos  XllO  pfennigs  =138,600  pfgs. 

138,600X$  .00238=$329.868,  28  m/m. 

Gain  on  each  m/m  =10  pfgs. 

Out-turn  showed  gain  of  2  m/m,  then — 

10X2  pfgs.  =20  pfgs. 

110  pfgs.  +20  pfgs.  =130  pfgs. 

1,260   Kilos    X  130=163,800   pfgs. 

163,800X.00238=$389,844,  30  m/m. 

Value  at  30  m/m  =  $389,844 
Value  at  28  m/m  =    329.868 


Gain  $  59,976  Ans. 

Note. — A   mark   =23.8   cents;    a   pfennig   is   x^^ 
of  a  mark,  therefore  =$  .00238. 

Ex.  7.     Prove  otherwise  Ex.  6  is  correct. 
Explanation : 

1,000  Kilos  =  2,205.07  lbs. 

200  Kilos  =     441.01  lbs. 

60  Kilos  =     132.30  lbs. 


1,260  Kilos  =  2,778.38  lbs. 


Checks  and  Drafts  265 

$389.844--2J78.38  lbs.  =  cost  1  lb.,  30  m/m  = 
$  .1403+. 

$329,868^2,778.38  lbs.  =  cost  1  lb.,  28  m/m  = 
$  .1187+. 

$  .1403—$  .1187=$  .0216=  gain  on  1  lb. 

2,778.38  lbs.   X$  .1187=$60.013   (a),  Ans. 

Ex.  8.  What  will  be  the  value  in  francs  for  150 
B/C  weighing  231.28  Kilos  each,  at  1  mark  per  Kilo? 

Ans.  42,780.8+fr. 

Ex.  9.  Adams  &  Smith,  Houston,  Texas,  shipped 
1,000  B/C  to  Mitsui  &  Co.,  Osaka,  Japan;  the  invoice 
weights  were  235,820  Kilos;  this  cotton  was  sold  for 
an  average  of  10%  cents  per  lb.  f,  o.  b.  Houston; 
the  draft  was  drawn  through  a  New  York  bank  for 
U.  S.  money;  it  drew  on  Mitsui  &  Co.,  in  Yen;  find 
face  of  draft  in  Yen. 

Ans.    113,554.23+  Yen. 

(a)  The  slight  difference  in  the  two  answers  is 
caused  by  not  extending  the  decimals  beyond  4  places. 

Note. — Consult  Tables  7  and  9  in  solving  problems 
8  and  9  above. 


COTTON  QUOTATIONS— CALCULATIONS   FOR 
PRIMARY  BASIS  PRICE. 

The  New  Orleans  and  New  York  Cotton  Exchanges 
being  the  only  two  dealing  in  future  contracts  in 
the  United  States,  quotations  for  such  futures  on  the 
Exchanges  in  Galveston,  Houston,  Little  Rock,  Mem- 
phis, Atlanta,  Shreveport,  Augusta,  etc.,  are  for  tho. 
New  Orleans  and  New  York  markets,  but  each  of  the 
other  mentioned  places  quote  spot  cotton,  this  spot 


266  The  American  Cotton  System 

price  being  made  by  committees  especially  elected  or 
appointed  for  such  business. 

The  duties  requisite  of  these  committees  while  not 
entirely  identical,  are  so  similar  in  many  respects  as 
to  require  no  severance  in  a  detailed  description. 

For  illustration  let  us  take  the  committee  of  the 
Houston  Cotton  Exchange,  which  consists  of  five  ap- 
pointed members,  whose  duty  is  to  ''furnish  daily 
quotations''  for  spot  cotton  '* based  on  Houston  stand- 
ards, ' '  that  is,  based  on  a  type  of  cotton  the  samples 
of  which  the  Exchange  would  recognize  as  good  mid- 
dling, strict  middling,  middling,  etc.  ''In  practice 
this  committee  consisting  of  three  factors  and  two 
buyers,  the  quotations  are  based  upon  the  sales  that 
have  been  made  during  the  day. ' ' 

Houston  and  Galveston  are  rival  markets  and  it  has 
been  frequently  stated  that  quotations  for  these  mar- 
kets can  not  always  be  realized,  from  the  fact  of  an 
active  competition  creating  a  tendency  to  over-quote 
the  market,  this  statement  arising  from  those  selling 
or  consigning  cotton  to  those  markets,  but  from  buy- 
ers and  factors  operating  in  the  two  places  such  state- 
ments do  not  meet  with  full  corroboration. 

All  exchanges  do  not  have  the  same  number  of 
committeemen;  notably,  Memphis  has  seven,  it  be- 
ing customary  for  four  factors  and  three  buyers  one 
month  and  three  factors  and  four  buyers  next  month, 
etc.,  to  serve;  the  chairman  alternating.  Little  Rock 
has  a  committee  of  three,  two  buyers  and  one  factor, 
who  operate  as  a  sub-committee.  Each  member  "either 
from  his  own  transactions  or  transactions  of  others, 
puts  prices  on  a  slip  of  paper,"  which  "slips  are 
turned  over  to  the  secretary  of  the  exchange.    If  any 


Checks  and  Drafts  267 

two  agree,  their  figures  are  the  price;  if  each  is  dif- 
ferent the  average  of  all  the  prices  is  used.''  Their 
actions  are  based  on  transactions  in  spot  cotton  that 
have  occurred  during  the  day. 

The  Augusta  Exchange  has  six  members,  usually 
three  buyers  and  three  sellers,  occasionally  tieing  on 
a  quotation;  if  three  quote  middling  9  cents  and 
three  9%,  then  the  quotation  would  be  posted  9 — 9%. 
Classification  for  this  exchange  is  higher  than  any  of 
the  others.  Augusta  middling  about  the  same  as 
Liverpool  good  middling. 

The  Savannah  Cotton  Exchange  rules  seem  to  be 
indeterminate  as  to  the  number  constituting  the  spot 
cotton  quotation  committee,  but  practically  the  com- 
mittee is  composed  of  both  buyers  and  sellers.  In 
determining  the  spot  cotton  valuations  to  be  posted 
''a  book  is  taken  around  each  day  one-half  hour  be- 
fore the  close,  and  each  member  of  the  committee 
writes  in  the  book  the  quotation  which  he  thinks 
should  be  established.  The  quotations  are  based  on 
even-running  grades,  and  a  majority  rules  in  deter- 
mining what  quotation  shall  be.'' 

The  Savannah  Exchange  has  the  Liverpool  classifi- 
cation, and  in  comparing  this  with  other  markets,  it 
is  well  to  be  remembered. 

From  these  quotations  wired  over  the  country,  and 
those  carried  daily  in  the  papers,  relative  values  for 
the  market  in  any  locality  can  be  determined. 

If  cotton  is  quoted  at  10%  in  New  Orleans,  what 
would  be  its  relative  value  in  Atlanta,  if  the  freight 
rate  between  the  two  places  is  40  cents  per  hundred  ^ 
on  cotton? 


268  The  American  Cotton  System 

Statement : 

Value  New  Orleans     10.875=  ( 10% ) 
Less  freight  .40 


Atlanta  valuation       10.475 

This  statement  shows  value  in  Atlanta  with  only 
freight  off,  but  it  is  usual  to  deduct  3  per  cent  brok- 
erage, the  margin  or  profit  desired,  also. 

Again,  value  in  N.  0.  10.875  cents 

Freight  .40 

Brokerage  ^  .03 

Expense  and  margin,   say,   .121/2 


Total  off  .551/2=        .555  cents 


Buying  Basis  in  Atlanta  10.320  cents 

Buyers  in  Atlanta,  then,  would  use  about  10.30 
as  a  basis  on  which  to  operate,  if  buying  ^'on  the 
market,"  that  is,  buying  at  a  price  it  is  worth  at  the 
time  in  the  open  market. 

Spot  buyers  generally  base  their  operations  on  the 
quotations  for  certain  fnUire  months,  instead  basing 
on  the  spot  quotations. 

It  should  be  remembered  that  all  quotations  for 
future  months  are  for  middling,  and  basing  on  spots, 
whether  they  be  exchange  quotations  or  quotations 
given  by  a  correspondent,  are  also  for  the  same  grade. 

Alternate  months  have  become  by  the  usage  of  the 
exchanges  adopted  as  the  governing  months  in  ascer- 
taining present  spot  values.  If  May  is  the  present 
month  then  July  would  be  a  basic  month  on  which 
to  calculate  a  spot  price;  if  for  delivery  in  the  more 
distant  month,  October  would  govern. 


Checks  and  Drafts  269 

Suppose  October  is  quoted  at  10.85,  and  a  sjSot 
dealer  is  willing  in  May  to  enter  into  contract  to 
sell  1,000  bales  to  be  delivered  in  that  month  at  50 
points  on  October,  then  his  basis  price  would  be  10.85 
-^50=11.35.  Were  this  transaction  consummated  in 
May,  this  dealer  would  protect  it  by  a  hedge  and  if, 
when  near  delivery  time,  the  spot  cotton  had  not 
been  secured,  he  would  buy  it  at  the  current  price 
at  the  time,  he  being  easy,  as  the  hedge  which  is 
allowed  to  drift,  had  secured  to  him  a  protection,  ex- 
cept in  instances  where  the  market  had  gone  against 
him,  then  additional  payment  on  his  part  would  be 
required  to  keep  the  hedge  vitalized. 

Should  this  merchant  who  sold  1,000  bales  at  11.35, 
find,  in  September,  the  market  was  10.90  and  for  fear 
it  might  ''go  against  him,''  (higher)  offer  10  points 
on  this  month  for  middling,  then  a  buyer  buying  for 
this  operator,  or  for  such  a  market  quotation,  at 
Atlanta,  would  calculate  this  way : 

October  New  Orleans  10.90     cents 

Ten  points  on  .10 


Value  in  New  Orleans  11.00    cents 

Freight  -40 

Brokerage  -03 

Margin  and  expenses  .121/2 


Total  off-set  .551/2  -^^^ 


Buying  basis  in  Atlanta  =  10.445  cents. 

If  this  Atlanta  buyer  can  by  reason  of  a  reversal 
in  the  market,  use  10.30  basis,  and  retain  the  ten 
points  offered,  he  has  been  fortunate  to  that  extent. 


270  The  American  Cotton  System 

problems. 

Ex.  1.  If  the  freight  rate,  Atlanta  to  New  Or- 
leans is  40  cents;  from  New  Orleans  to  Liverpool  32 
cents;  what  could  be  paid  in  Atlanta  for  M.  cotton, 
if  quoted  in  Liverpool  at  5.83d.,  brokerage  3,  and 
margin  and  expense  15  points? 

Ans.  10.76. 
Explanation : 

Value  in  Liverpool,  5.83 X$  .02=        11.66  cents 
Freight  .72 

Brokerage  .03 

Profit  and  expense  .15 

Total  off-set  .90 


Total  off-set  10.76 

Note. — One  pence  =$  .02+  =2+  cents. 

Ex.  2.  Freight,*  Memphis,  Tenn.,  to  Bremen  being 
68  cents;  what  will  be  my  basis  in  Memphis,  if  I 
wish  to  reserve  a  margin,  expense  and  profit,  of  18% 
cents,  and  cotton  quoted  in  Bremen  at  51  pfennigs? 

Ans.  1114. 

Explanation:      (See  note,  page  264.) 

51  X$  .00238=  12.1380  cents 

Freight*  .68 

Brokerage  .03 

Margin  and  expense  18%=  .1875 


Total  offset  .8975 


Memphis  basis  11.2405  cents. 


♦Freight  rates  are  assumed  approximations. 


Checks  and  Drafts  271 

The  preceding  will  suffice  to  show  how  to  make  the 
estimate  for  a  base  when  all  the  charges  are  known. 

For  foreign  account  all  the  charges  are  not  given 
for  the  reason  shipments  of  this  character  are  gene- 
rally made  subject  to  such  stipulations  for  expenses 
as  may  be  stated  in  the  sale  as  agreed  to  by  both 
parties. 

Parties  on  this  side  selling  to  European  consumers 
usually  have  a  representative  there  to  whom  ship- 
ments are  er^trusted  for  supervision,  and  such  charges 
as  receiving,  warehousing,  delivering,  commission, 
mending,  sampling,  tare,  5  per  cent  excess  insurance, 
cost  of  exchange,  etc.,  are  some  or  all  added  to  the 
lists  already  stated  in  the  problems. 

If  the  shipments  of  cotton  upon  receipt  and  ex- 
amination do  not  conform  identically  to  the  class 
guarantee,  and  buyer  and  seller  can  not  adjust  it 
themselves,  the  matter  is  referred  to  arbitration,  when 
so  adjusted,  further  charges  accrue. 

The  prices  quoted  for  foreign  markets  in  news- 
papers, showing  the  value  of  spots,  are  the  prices  that 
might  be  obtained,  after  payment  of  the  accustomed 
charges,  hence  it  is  not  definite  that  such  quotations 
can  be  obtained  at  all  times  for  cotton  delivered  at 
the  moment. 

COMPAEATIVB  VALUES  OF  UNITED  STATES 
AND  FOREIGN  FRACTIONAL  MONIES. 

The  following  table  will  be  found  of  service  in 
showing  the  comparative  values  of  foreign  monies 
compared  with  those  of  the  United  States. 

It  exhibits  the  values  of  the  minor  divisions  of  coin- 


272  The  American  Cotton  System 

age,  enabling  the  student  to  determine  at  a  glance 
the  comparative  values  of  such  money  with  ours,  and 
with  such  table,  operations  requiring  the  introduc- 
tion of  foreign  money  in  the  computations,  are  made 
easier. 

The  coinage  valuation  of  the  money  of  Germany, 
France  and  England  are  given  only,  as  these  coun- 
tries consume  the  greatest  percentage  of  our  cotton 
crops. 

The  figures  in  the  first  row  show  the.  comparative 
value  of  1  cent,  1  pfennig,  1  centime,  and  1  penny,  to 
a  dollar. 

The  rows  of  figures,  under  their  proper  heading, 
show  how  many  of  one  kind  it  takes  to  equal  another 
of  a  different  kind. 

To  know  how  many  pfennigs  equal  5  cents,  read 
the  top  line  crosswise  and  it  shows  5  cents  equal 
21.01  pfennigs,  25.91  centimes,  and  ^^  pence. 

In  like  manner  to  ascertain  the  equivalent  num- 
ber of  pfennigs  or  centimes  for  any  number  of  cents 
from  5  to  16,  find  the  number  in  cents  and  opposite 
on  the  same  line  will  be  found  the  number  desired  in 
foreign  money. 

Excepting  the  English  coinage,  all  the  others  quoted 
are  in  percentages;  that  is,  it  takes  100  cents  to  make 
a  dollar;  100  pfennigs  to  make  a  mark;  100  centimes 
to  make  a  franc,  therefore  fractions  of  a  dollar,  mark 
and  franc  can  be  expressed  as  a  decimal  of  it. 

To  write  fifty  marks  and  twenty  pfennigs,  write 
50.20  m. ;  two  hundred  and  sixteen  marks  and  38 
pfennigs,  write  216.38  m. ;  seventy-five  francs  and  six- 
teen centimes,  write  75.16  fr. 

To  get  a  clear  idea  of  the  comparative  values,  let 


Checks  and  Drafts 


273 


it  be  stated  that  cotton  is  worth  Ty^  cents  a  pound; 
what  is  its  value  in  centimes?  (38.87)  ;  what  in  pfen- 
nigs? (31.51);  what  in  pence?  (3.70.)  (See  the 
table. ) 

For  greater  accuracy,  the  German  and  French  val- 
ues have  been  carried  to  4  decimal  places,  with  a 
point  (.)  dividing  the  decimal,  and  instead  of  writ- 
ing the  decimal  as  .6353  of  a  mark,  it  is  written  as 
63.53  pfennigs,  with  the  same  form  for  the  French 
expressions — the  penny  is  almost  twice  the  value  of 
one  cent. 

Quotations  for  the  German  market  are  in  pfennigs, 
each  pfennig  representing  %  Kilo  in  weight,  equal 
to  liT  pounds;  while  for  France  they  are  given  in 
francs,  and  for  the  weight  of  50  Kilos,  or  110  pounds. 

Quotations  for  foreign  cotton  are  for  net  weight, 
the  tare  usually  reckoned  at  6%  from  gross  weight. 
(See  Bremen  Cotton  Exchange  rules,  page  117.) 


Table  No. 

10. 

United  States. 

Germany. 

France. 

England 

Cents.  - 

Pfennigs. 

Centimes. 

Pence. 

$.01 

$.00238 

$.00193 

$.02+ 

1 

4.20 

5.18 

0.50 

2 

8.40 

10.36 

1.00 

3 

12.60 

15.54 

1.50 

4 

16.81 

20.73 

2.(H) 

5 

21.01 

25.91 

2.41 

51/8 

21.53 

26.55 

2.53 

51/4 

.    22.06 

27.20 

2.59 

5% 

22.58 

-     27.85 

2.65 

51/2 

23.11 

28.50 

2.71 

18 


274  The  American  Cotton  System 

Table  No.  10 — Continued. 


ited  States. 

Grermany. 

France. 

England. 

Cents. 

Pfennigs. 

Centimes. 

Pence. 

5% 

23.63 

29.15 

2.77 

5% 

24.16 

29.79 

2.83 

57/8 

24.68 

30.44 

2.90 

6 

25.21 

31.10 

2.96 

61/8 

25.73 

31.75 

3.02 

61/4 

26.26 

32.39 

3.08 

63/8 

26.79 

33.04 

3.14 

6y2 

27.31 

33.69 

3.20 

65/8 

27.84 

34.34 

3.27 

63/4 

28.36 

34.89 

3.33 

6% 

28.89 

35.64 

3.39 

7 

29.41 

36.27 

3.45 

71/8 

29.94 

36.92 

3.51 

m 

30.46 

37.57 

3.57 

7% 

30.99 

38.22 

3.64 

71/2 

31.51 

38.87 

3.T0 

7% 

32.04 

39.52 

3.76 

73/4 

31.55 

40.15 

3.82 

778 

33.07 

40.80 

3.88 

8 

33.61 

41.45 

3.95 

81/8 

34.12 

42.10 

4.01 

81/4 

34.65 

42.75 

4.07 

83/8 

35.17 

43.39 

4.13 

81/2 

35.69 

44.04 

4.19 

8% 

36.22 

44.69 

4.25 

8% 

36.75 

45.33 

4.31 

8% 

37.27 

45.98 

4.38 

9 

37.82 

46.63 

4.44 

91/8 

38.32 

47.27 

4.50 

Checks  and  Drafts  275 

Table  No.  10 — Continued. 


Fnited  States. 

Germany. 

Prance. 

England. 

Cents. 

Pfennigs. 

Centimes. 

Pence. 

91/4 

38.85 

47.92 

4.56 

9% 

39.37 

48.56 

4.62 

91/2 

39.90 

49.21 

4.68 

9% 

40.43 

49.86 

4.75 

93/4 

40.95 

50.50 

4.81 

•       97/8 

41.47 

51.15 

4.87 

10 

42.02 

51.81 

4.93 

10% 

42.53 

52.45 

4.99 

101/4 

43.05 

53.10 

5.05 

103/8 

43.57 

54.75 

5.12 

101/2 

44.10 

55.39 

5.18 

10% 

44.62 

56.04 

5.24 

103/4 

45.15 

55.69 

5.30 

10% 

45.67 

^56.34 

5.36 

11 

46.22 

56.99 

5.42 

111/8 

46.73 

57.64 

5.49 

111/4 

47.25 

58.28 

5.55 

113/8 

47.77 

58.93 

5.61 

111/2 

48.30 

59.58 

5.67 

11% 

48.83 

60.22 

5.73 

113/4 

49.35 

60.87 

5.79 

11% 

49.87 

61.52 

5.86 

12 

50.42 

62.17 

5.91 

121/8 

50.93 

62.82 

5.98 

121/4 

51.45 

63.47 

6.04 

123/8 

51.97 

64.11 

6.10 

121/2 

52.50 

64.76 

6.16 

12% 

53.03 

65.41 

6.22    . 

123/4 

53.55 

66.05 

6.29 

276  The  American  Cotton  System 

Table  No.  10 — Continued. 


TTnited  States. 

Grermany. 

France. 

England 

Cents. 

Pfennigs. 

Centimes. 

Pence. 

12% 

54.07 

66.70 

6.35 

13 

54.62 

67.35 

6.41 

131/8 

55.13 

67.99 

6.47 

131/4 

55.65 

68.64 

6.53 

13% 

56.17 

69.29 

6.60 

131/2 

56.70 

69.93 

6.66 

13% 

57.22 

70.58 

6.72 

133/4 

57.75 

71.23 

6.78 

13% 

58.27 

71.89 

6.84 

14 

58.82 

72.54 

6.90 

141/8 

59.33 

73.18 

6.96 

141/4 

59!85 

73.81 

7.03 

14% 

60.37 

74.46 

7.09 

141/2 

60.90 

75.13 

7.15 

14% 

61.42 

75.76 

7.21 

143/4 

61.95 

76.42 

7.27 

14% 

62.48 

77.07 

7.33 

15 

63.03 

77.72 

7.40 

151/8 

63.53 

78.37 

7.46 

151/4 

64.05 

79.02 

7.52 

153/8 

64.57 

79.66 

7.58 

151/2 

65.10 

80.31 

7.64 

15% 

65.63 

80.96 

7.70 

15% 

66.15 

81.60 

7.77 

■  15% 

66.68 

82.25 

7.83 

16 

67.23 

82.90 

7.89 

These   values   are   calculated   on   the   basis   of   the 
United   States  Mint  valuations — see  Table  No.   7. 


Checks  and  Drafts  277 

problems. 

Ex.  1.     If  cotton  is  quoted  on  the  Havre  Bourse 

(Exchange)  at  72  for  M.,  what  is  the  value  in  New 

Orleans,  freight  being  28? 

Ans.   12.35  cents. 

Note.— This  quotation  is  72  francs  for  50  Kilos,  110 
pounds;  freight  rate  is  28  cents  per  hundred  pounds. 

Explanation : 

1  fr.  =$  .193;  72  fr.  =72X.193=$13.896. 

$13,896-^110=12.63  cents  per  pound. 

12.63—28=12.35,  value  in  New  Orleans,  Ans. 

This  value  is  for  the  cotton  without  other  charges 
than  freight  and  profit  deducted. 

Ex.  2.  A  Galveston  merchant  sold  100  B/C  (50,000 
lbs.)  f.  0.  b.  Manchester,  England,  at  6d;  what  is  the 
value  of  the  cotton  at  Galveston  in  U.  S.  money,  and 
what  price  in  cents  per  pound,  exchange  quoted  at 
4.80,  and  freight  at  30  cents  a  hundred? 

Ans.  Total  value  $5,490;  price  per  pound,  10.98c. 

Explanation : 

(1)  Total  gross  weight     50,000  lbs. 

Less  6%  tare  3,000  lbs. 


Net  weight  47,000  lbs. 

47,000  lbs.  X6  d.  =282,000  d. 

282,000^12  d.  =23,500  s. 

23,500-^20  s.  =1,175  £. 

Freight  on  50,000  lbs.  at  30  cents  per  hundred  = 
$150. 

$150-^4.80=31%.  £'s  =  £31,  5  s. 

£1,175— 31i4=£l,14334. 

1,14334 X4.80=$5,490.     Total  value. 

$5,490-f-50,000  lbs.  =10.98  cents  ==  Galveston 
price. 


278  The  American  Cotton  System 

(2)  6  d.  =12  cents  =      12.00 

Less  6%       =.72 
Less  freight     .30=      1.02 


Galveston  price  10.98  cents,  Ans. 

50,000  lbs.  X10.98=$5,490  Total  value. 
Briefly,  50,000—3,000=47,000  at  6  d.  =£1,175,  0  s. 
Less  freight  at  30  cents  =  31,  5  s. 


Net  value  £1,143.15  s. 

£1,143,  15  s.   X4.90=$5,490-^50,000=10.98c. 

Ex.  3.     Cotton  is  quoted  on  the  Bremen  Exchange 
at  55  pfennigs;  what  is  value  in  cents? 

Ans.  11.905  cents. 
Note. — The  quotation  is  for  I/2  Kilo  =1to  ^^^• 
Explanation:     ^  Kilo  (ly^o  lbs.)  =55  pfennigs. 
If  IxV  lbs.  =55  pfennigs,  1  lb.  will  =  li^o  of  55  p. 
55-^1.1=50  p. 

4.20  p.  =1  cent.     (See  Table.) 
50  p.  -^.20=11.905  cents.     Ans.,  nearly. 
Ex.  4.    What  would  be  the  value  in  Dallas,  Texas, 
for  cotton  quoted  in  example  3,  if  freight  is  85  and 
tare  6%  ? 

Ans.  10.34%  cents. 
Explanation : 

Bremen  value  11.905  cents 

6%  of  11.905=  .71 

Freight  .85 

Total  tare  and  freight  1.560 


Dallas  equivalent  value  10.345  cents. 


Checks  and  Drafts  279 

Ex.  5.  What  is  the  value  in  U.  S.  money  if  the 
German  market  is  quoted  at  54.6  pfennigs?  (See 
Table.) 

Ans.  13  cents. 

Ex.  6.  Brokerage  3,  commission  2,  tare  6,  other 
expenses  and  profits  12,  freight  65,  what  should  a 
buyer  in  Macon,  Ga.,  offer  as  a  basis  for  cotton  based 
on  the  quotation  in  example  5? 

Ans.  11.40  cents. 

Explanation : 

54.6  p.  =(See  Table.)  13.00  cents 

6%  tare  =  .78 

Brokerage  .03 

Commission  .02 

Freight  .65 

Expenses  and  profit  .12 

Total  offset  1.60 


11.40 
This  buyer  would  offer  about  11.40,  as  M.  base 
price,  provided  he  had  his  cotton  sold  and  protected, 
or  if  the  market  showed  stability,  with  good  indica- 
tions for  an  advance,  he  might  offer  this  figure  with- 
out a  hedge. 

As  previously  stated,  offsets  given  in  the  problems 
here,  are  only  approximations,  but  it  serves  to  illus- 
trate the  manner  in  which  calculations  are  to  be  made 
to  ascertain  a  base. 

The  total  amount  of  charges  to  come  off  the  quot- 
ed market,  or  premiums  to  be  added,  are  usually 
stated   and  agreed  upon  by  both  buyer  and  seller. 


280  The  American  Cotton  System 

when  trade  is  made,  especially  when  for  foreign  ac- 
count. 

A  buyer  on  a  foreign  market  might  offer  a  certain 
price  f.  0.  b.  Liverpool,  Bremen  or  Havre,  as  the  case 
should  be,  then  the  seller  would  determine  the  ex- 
penses to  accrue  to  himself  before  he  could  land  the 
cotton  there,  which  would  be  such  charges  as  freight, 
clerical  assistance,  exchange,  marine  insurance,  cable- 
grams, and  whatever  margin  he  desired  to  make  or 
could  make,  and  arbitration  fees,  etc. 

Ex.  7.  A  bale  of  cotton  weighing  520  lbs.  was 
sold  for  10  cents  a  pound;  what  was  its  value  in  dol- 
lars and  cents,  marks  and  pfennigs,  francs  and  cen- 
times, and  English  money?     (See  Table.) 

Ans.  $52.00;  Marks,  218.50;  Francs,  269.42;  £10, 
13  s.,  8  d. 

Explanation:     (See  Table.) 

Multiply  weight  of  bale  by  42.02  p.  =520X42.02= 
21,850.4  p. 

21,850.4-f-100=218.50+  marks.    Ans. 

In  like  manner  for  the  French  weights,  multiply 
51.81c.  X  520=26,941.2  centimes  -:-100=269.41+ 
Francs,  Ans. 

520  lbs.  X3.93  pence  =2,563.6  pence. 

2,563.6-{-240  (number  of  pence  in  a  £)=£10.6816+ 

20  s. 


s.  13.6320 

12  d. 


d.  7.5840 
The  answer  is  £10,  13  s.,  8  d. 


Checks  and  Drafts  281 

From  the  preceding  a  rule  can  be  formed. 

To  find  the  value  of  Marks,  Francs,  and  all  monies 
with  fractional  percentages. 

Rule. — Multiply  the  total  weight  of  the  cotton  by 
the  price  in  pfennigs  or  centimes,  divide  the  product 
by  100;  the  answer  ivill  be  in  Murks  amd  Francs,  with 
decimals  as  pfennings  or  centimes,  should  the  division 
not  come  out  even. 

To  find  the  value  in  pounds,  shillings  and  pence. 

Rule. — Multiply  the  weight  of  the  cotton  in  pence, 
divide  the  product  by  240,  (the  number  of  pence  in 
a  pound),  the  quotient  will  be  pounds,  and  decimals 
of  a  pound,  which  decimal  reduce  to  shillings  and 
pence  by  multiplying  it  hy  20  s.  first,  cutting  off  the 
left  whole  number  as  shillings,  multiplying  the  result- 
ing decimal  by  12  d.,  the  left  whole  number  being  the 
number  of  pence. 

Ex.  8.  What  will  be  the  value  of  2  B/C,  1040  lbs. 
at  8V2  cents  a  pound  IT.  S.,  French,  German  and 
English  money? 

Ans.,  $88.40;  Marks,  371.18;  Francs,  458.02;  £18, 
3  s.,  4  d. 

Ex.  9.  John  Anson  sold  15  B/C  weighing  7,830 
lbs.  at  11%  cents;  what  is  its  value  in  dollars  and 
cents,  marks  and  pfennigs,  francs  and  centimes, 
pounds,  shillings  and  pence? 

Ans.,  $890,661/4;  M.,  3,740.39;  F.,  4,614.22;  £,  183, 
0  s.,  5  d. 

Note. — See  Table  No.  10  for  comparative  values. 

Explanation : 

Multiply  11%  cents  by  7,830  lbs.  =$890.6614. 

Multiply  47.77  p.  X 7,830  lbs.  =374,039.10--100= 


282  The  American  Cotton  System 

3,740.39+m. ;  58.93  c.  X 7,830=461,421.9  c.  -^100= 
4,614.22,  nearly. 

For  conversion  of  U.  S.  money  to  Sterling,  see  ex- 
amples in  preceding  portion  of  this  work,  "Exchange 
on  Englaiid/'  The  comparative  values  of  the  Marks 
and  Francs  in  the  answer  are  slightly  too  small  as  to 
the  number  of  pfennigs  and  centimes,  owing  to  the 
fact  of  the  Table  showing  decimals  only  to  4  places. 

In  calculating  the  Table  for  pfennigs,  centimes, 
etc.,  the  basis  for  such  were  the  U.  S.  mint  valuations, 
that  is: 

1  Mark  =  23.8  cents. 

1  Dollar  =4.20  marks. 

1  Franc  =  19.3  cents. 

1  Dollar  =  5.181/8  francs. 

1  Penny  =  2  cents,  nearly. 

1  Dollar  =  4  shillings  and  1  penny. 

1  £  =  $4.8661/2. 

In  example  9,  let  it  be  required  to  find  the  number 
of  dollars  in  3,740.39  marks,  the  process  is  performed 
by  dividing  by  4.20  m.  as  it  takes  that  many  to  make 
one  dollar;  for  the  4,614.22  francs,  divide  by  5.18% 
(5.18125),  the  result  will  be  in  dollars  and  cents. 

It  should  be  remembered  that  the  Mint  valuations 
for  comparative  values  are  stable,  while  those  for 
commercial  purposes  are  variable,  hence  the  differ- 
ent rates  quoted  by  banking  institutions  for  exchang- 
ing money  of  one  nation  for  that  of  another. 

Should  a  cotton  merchant  receive  a  60-day  draft  on 
Paris  for  his  cotton,  and  one  bank  offer  to  exchange 
the  French  to  U.  S.  money  for  5.18%  francs  to  the 
dollar,  and  another  bank  offer  him  5.1814  francs  to 


Checks  and  Drafts  283 

the  dollar,  it  is  evident  the  first  bank  offered  the 
cheaper  exchange  for  the  merchant,  as  he  could  get 
more  dollars  for  his  draft. 

Rates  of  exchange  may  vary  widely  at  different 
times,  but  only  when  abnormal  circumstances  act  as 
exciting  causes. 

The  variation  is  quite  small  when  commercial  trans- 
actions are  moving  normally. 


284 


The  American  Cotton  System 


TABI.E  NO.   11. 
Dates  of  Earliest  Killing'  Frosts  in  the  Cotton  States. 

(U.   S.   Weather  Bureau   Reports.) 


State 


N.  Carolina— 
N.  Carolina..- 
N.  Carolina... 
N.  Carolina— 
S.  Carolina... 
S.   Carolina.. - 

Georgia 

Georgia  

Georgia 

Georgia  

Georgia  

Florida 

Florida 

Alabama 

Alabama 

Alabama 

Mississippi 

Mississippi 

Louisiana 

Louisiana 

Texas 

Texas 

Texas 

Texas 

Arkansas 

Arkansas 

Tennessee 

Tennessee 

Tennessee 


Locality 


I  1907^ 


Charlotte  

Rockingham  

Raliegh   

Goldsboro    

Charleston 

Columbia  

Atlanta  

Augusta   

Savannah  

Columbus 

Rome 

Jacksonville    

Pensacola  

Eufaula 

Mobile   

Montgomery 

Vicksburg 

GreenviUe  

New  Orleans 

Shreveport    

Galveston 

Palestine 

San  Antonio 

Ft,  Worth 

Little  Rock 

Ft.  Smith 

Memphis  

Nashville 

Chattanooga  


Nov. 
Nov. 
Oct. 
Oct. 
Nov. 
Oct. 
Oct. 
Nov. 
Nov. 
Nov. 
Oct. 
Dec. 
Dec. 
Nov. 


1906-07    1905-06 


Oct. 

Oct. 

Oct. 

Oct. 

Nov. 

Oct. 

Oct. 
14  Oct. 
14 1  Nov. 
13!  Nov. 
14 1  Oct. 


12  Nov. 
11  j  Nov. 


Nov. 
Nov. 
Oct. 


Nov.  12 


Nov. 
Nov. 
Nov. 
Nov. 
Nov. 
Nov. 
Oct. 
Nov. 


Nov. 
Dec. 
Oct. 
Dec. 
Nov. 
Nov. 
Oct. 
Dec. 
Nov. 


Nov, 
Nov, 
Dec. 
Nov. 
Oct. 
Nov. 

13  Dec. 

13  i  Nov. 

11  Oct. 

13 

23  Dec. 
29  Nov. 
24lDec. 
13,  Nov. 
13  Nov. 
11  Nov. 

24  Dec. 
iNov. 


1905-04 


11  Oct. 

12  Nov. 
15 1  Nov. 
12  Nov. 

11  [Dec. 
22  Nov. 

22  Nov. 

12  j  Nov. 
4  Dec. 

23  Nov. 
22*Nov. 

Dec. 
Dec. 
Nov. 
Dec. 
Nov. 
Nov. 
Nov. 
Dec. 
Nov. 


1904-03 


Nov. 
Nov. 
Nov. 
Nov. 
Oct. 
Nov. 
Oct. 
Oct. 


Dec. 
Dec. 
Nov. 
Nov. 
Nov. 
Nov. 
Nov. 
Nov. 


Nov.  27 
Oct.  28 
Nov.  28 
7;0ct.  27 
13  Nov.  28 
I5IN0V.  28 
7j0ct.  25 
15 i Oct.  28 
131N0V.  28 


Nov. 

Nov. 

Nov. 
30  iNov. 
291  Nov. 


Nov. 
Nov. 
Nov. 


Nov.  27 
Nov.  28 
Nov.  28 
Nov.  27 
Nov.  2S 
Nov.  19 
Nov.  27 
Nov.  19 
Nov.  19 
Nov.  19 
Nov.  19 


Nov.  19 
Nov.  18 
Nov.  18 
Nov.  18 
Nov.  19 
Nov.  18 
Nov.  25 
Nov.  28 


Tables 


285 


TABI^Z:  NO.   12. 

Number  of  Active  and  Idle  Ginneries,  and  Average  Number 
of  Running-  Bales,  Excluding  I^inters,  G-inned  per  Active 
Establishment,  by  States:  1904  to  1908. 


State 

o 

O 


United   States. 


Alabama 


Arkansas 


Florida 


Georgia 


Mississippi 


North    Carolina. 


1908 
1907 
1906 
1905 
1904 

1908 
1907 
1906 
1905 
1904 

1908 
1907 
1906 
1905 
1904 

1908 
1907 
1906 
1905 
1904 

1908 
1907 
1906 
1905 
1904 

1908 
1907 
1906 
1905 
1904 

1908 
1907 
1906 
1905 
1904 

1908 
1907 
1906 
1905 
1904 


«M  h     , 

"S-i 

Number  of  Ginneries    1 

111 

§|« 

Total 

Active 

Idle 

Average 
bales 
active 
ment 

30,3451 

27,598 

2,747 

478 

30,822! 

27,592 

3,230' 

404 

31,3251 

28,709 

2,616 

457 

31, 441 1 

29,038 

2,403| 

866 

32,855 

30,337 

2,518| 

448 

3,762 

3,490 

272 

1          384 

3,857 

3,460 

397 

:           824 

3,984 

3,658 

326 

1          843 

1       4,020 

!      3,736 

284 

;          333 

!       4,239 

;       3,912 

327 

374 

2,340 

2,128 

212 

1          471 

2,381' 

1      2,115 

266 

1          357 

2,487 

2,312 

175 

889 

2,521 

2,306 

215 

i          ^ 

2,631 

2,451 

180 

86S 

301 

1          258 

48 

274 

304 

259 

46 

219 

309 

1          276 

88 

223 

311 

292 

19 

270 

811 

279 

32 

314 

4,950 

4,475 

475 

442 

5,106 

'      4,567 

539 

408 

5,135 

4,586 

649 

857 

5,185 

4,779 

406 

882 

5,465 

4,980 

486 

896 

2,011 

1.708 

808 

280 

2,125 

1,874 

251 

861 

2,225 

2,076 

^S 

471 

2,254 
2,396 

2,079 

176 

252 

2,240 

156 

495 

3,896 

8,491 

406 

464 

3,987 

'      8,641 

446 

408 

4,152 

1      8,780 

872 

898 

4,215 

8.886 

880 

801 

4,442 

4.084 

868 

4S6 

8,034 

2,788 

246 

846 

8,039 

2.754 

286 

282 

8,089 

2,792 

247 

219 

3,044 

2,884 

210 

280 

8,188 

2,947 

286 

254 

286  The  American  Cotton  System 

TABI.E  irO.   12— Continued. 


o  Sx: 

O,  a> 

Number  of  Ginneries 

*-<      ?3 

'^'S* 

b 

Sfll 

State 

08 

3S* 

Xi 

l">^ 

2 

Total 

Active 

Idle 

mi 

o 

< 

Oklahoma  

1908 

1,057 

987 

70 

722 

1907 

1,051 

971 

80 

897 

1906 

987 

939 

48 

950 

1905 

891 

848 

48 

809 

1904 

848 

809 

39 

1,017 

South    Carolina ^ 

1908 

3,481 

3,241 

240 

375 

1907 

3,437 

3,^92 

245 

365 

1906 

3,394 

3,146 

248 

290 

1905 

3,392 

3,170 

222 

351 

1904 

3,453 

3,247 

206 

367 

Tennessee 

1908 
1907 

761 

784 

657 
673 

104 
HI 

509 

396 

1906 

833 

702 

131 

417 

1905 

847 

734 

118 

367 

1904 

894 

762 

132 

421 

Texas  

1908 

4,507 

4,169 

838 

887 

1907 

4,501 

3,995 

506 

563 

1906 

4,532 

4,232 

300 

952 

1905 

4,523 

4,165 

358 

604 

1904 

4,753 

4,416 

337 

711 

All  other  states* 

1908 
1907 

245 
250 

206 
191 

39 

59 

357 

241 

1906 

248 

210 

38 

325 

1905 

238 

210 

28 

278 

1904 

240 

210 

30 

327 

•Includes   Arizona,    Kansas,    Kentucky,    Missouri,    New    Mexico,    and 
Virginia. 


I 


o 

A 
02 


bo 


o  n 


H  s     * 

rf   g   o   * 

III 

^  p  o 
«  §»» 

i    " 

O         f-1 
O  (8 

n 


o 


t 

o 
O 


Tablks 


^^  s 


8 


S    g    8 


li  § 

1  § 

s 

OS 
00 

oT 

287 

§   § 


i     i     I 


& 

f^ 


288 


The  American  Cotton  System 


TABI.I:    NO.    14. 

No.    Cotton    Mills    in    U.    S.    Showing-    No.    of    Spindles,    Bales 
Consumed,   and   Stocks   in   XSacli   State. 

(U.    S.    Census    Bureau.) 


29,946 

825 

3,590 

49,060 

62,400 

1,575 

4,445 

5,220 

799 

37,616 

4,445 

367,098 

3,491 

1,168 

82,696 

9,217 

37,797 

84,542 

8,564 

12,933 

76,250 

96,487 

10,508 

5,543 

1,342 

9,085 

6,798 


1,016,738 


Tables 


289 


TABI^E   NO.   15. 

Production,  Total  Acreag^e,  Total  Estimated  Value,  ATerag'e 
Net  Weig-ht  of  Bale,  Value  of  Lint  by  the  Pound,  Prom 
1790  to   1906. 

This  Statement  Shows  the  Running-  Bales  as  They  Come 
from  the  Press,  Bound  Bales  Being*  Counted  as  Halves. 

The  Values  Given  Are  Por  Cotton,  Including"  Linters,  and  Not 
Por  the  Value  of  Cotton  Seed  Products. 

(Linters,   short  fiber   taken    from   the   seed   at  the  oil   milhs.) 


State 


Total 
acreage 


Total 
bales 


I 
Total     I    Net 
value      I    Wt. 


Av. 
price 


1908  ;  32,444,000 

1907  !  31,311,000 

1906  !  28,()86,000 

1905  :  26,117,153' 

1904  30,053,739 


1903 
1902 
1901 
1900 


1897 
1896 
1895 
1894 
1893 
1892 
1892 
1891 
1890 
1889 
1888 
1887 
1886 
1885 
1884 
1883 
1882 
1881 
1880 
1879 
1878 
1877 
1876 
1875 
1874 
1873 
1872 
1871 
1870 
1869 
1868 
1867 
1866 
1865 
1864 
1863 


28,016,893, 
27,114,1031 
27,220,414 
25,758,139 
24,275,101 
24,967,295; 
24,319,584! 
23,273,2091 
20,184,808: 
23,687,950, 
19,525,000 


13,432 

11,325, 

13,305, 

10,725 

13,697 

10,015, 

10,784 

9,748 

10,245 

9,345 

11,189, 

10,897, 

8,532 

7,161 

9,901 

7,493 


131 
882 
265 

,602 
310 
721 
473 

,546 
602 
391 
205 


$588,814,828 
613  "'  ' 
640 
556 
561 
576 
421 


311,538 
833,817' 
100,386: 
499,824 
687,941 


323, 
314, 
,8571  356, 
,7051  275, 
0941  259, 
251  220, 
nnnl  9m 


758,171 
263,615 
294,209 
718,223 
468,107 
441,452 
502,928 


___           . 

""    "  ""  "  "  1 "    

20,175,270 

7    --      — 

1    

_J__  _  

* 

14,480,019 



1 

i 

1 





6,700,365; 
9,035,379 
8,652,597 
7,472,511] 
6,938,290; 
7,046,&33 
6,505,087; 
6,575,691! 
5,706,165, 
5,713,200! 
6,949,756; 
5,456,048; 
6,605,750' 
5,755,359| 
5,074,155 
4,773,8651 
4,474,069' 
4,632,313 
3,832,991 
4,170,388 
8,930,508 
2,974,351 
4,352,317 
3,011,996 
2,366,467 
2,519,554 
2.097,254 
2,269,316 
300,000 
450,000 


267,344,5641 
311,982,601: 
351,970,341 
296,4<i4,401 
281,312,968 
279,724,037! 
247,140,771 
258,786,319 
241,484,903; 
237,55-1,856, 
323,372,147 
245,522,160 
297,787,210; 
266,519,165 
185,888,077, 
225,565,1211 
194,890,416 
228,298,914 
219,247,085 
261,082.970 
287,949,016 
285,857,111 
282,770,618 
218,670,910 


484 
480 
490 
482 
478 
480 
481 
489 
480 
476 
489 
482 
477 
477 
484 
474; 
475 
475; 
473 

473: 

478 
477 
467 
464 
463 
460 
462 
470 
450 
460 
454 
447 
460 
440 
444 
440 
44* 
444 
443 
442 
440 
444 
445 
444 
441 
477 
477 


9.2 

11.5 

10.0 

11.1 

3.0 

12.2 

8.8 

8.1 

9.3 

7.6 

4.9 

5.6 

7.3 

8.2 

5.9 

7.5 

8.4 

8.4 

7.8 

8.6 

11.5 

10.7 

10.8 

10.3 

9.4 

10.5 

10.6 

10.6 

12.2 

11.8 

12.0 

10.8 

11.8 

11.7 

18.0 

15.0 

17.0 

18.2 

20.6 

17.0 

24.0 

29.0 

24.0 

31.fi 

43.2 

83.4 

101.5 


290 


The  American  Cotton  System 

TABI^i:  NO.   15 — Continued. 


State 

Total 
acreage 

Total 
bales 

Total 
value 

Net 
Wt. 

Av. 
price 

1862  

1,600,000 
4,500,000 
3,849,469 
5,387,052 
4,018,914 
3,257,339 
3,093,737 
3,665,557 
2,982,634 
3,074,979 
3,416,214 
3,126,310 
2,454,442 
2,469,093 
2,866,938 
2,439,786 

477 
477 
477 
461 
447 
442 
444 
420 
434 
430 
438 
428 
416 

67.2 

1861  

31.8 

1860  

13.0 

1859  

11.0 

1858  

12.1 

1857  

12  2 

1856  

13.5 

1855  

10.3 

1854  _  

10  4 

1853  __. 

11  0 

1852  

11.0 

1851  

9.5 

1850   

12  1 

1849  

429 
436 

12  3 

1848  

7.5 

1847  

417 
431 
411 
415 
412 
409 
397 
394 
383 
384 
379 
379 
373 
367 
863 
350 

^ 

339 
341 
335 
331 
312 
286 
282 
298 
283 
278 
264 
280 
279 
282 
271 
275 
246 
246 
246 
297 
250 
224 
276 
280 

8.0 

1846  

1,778,651 
2,100,537 
2,394,503 
2,030,409 
2,378,875 
1,683,574 
1,634,954 
2,063,915 
1,360,532 
1,801,497 
1,423,930 
1,360,725 
1,253,406 

11  2 

1845  

7  9 

1844  

5.6 

1843  

7  7 

18i2  

7  2 

1841  

7.8 

1840  



9.5 

1839  

8  9 

1838  

13  4 

1837  __. 

10.1 

1836  

13.2 

1835  _ 

16  5 

1834  

17.4 

1833  

1,225,895 
1,114,286 
1,069,444 
1,026,393 
1,076,696 
953,079 
805,970 
1,057,402 
817,308 
751,748 
656,028 
704,698 
636,042 
575,540 
632,576 
446,429 
465,950 
439,716 
369,004 
254,545 
304,878 
304,878 
325,203 
286,195 
328,000 
334,821 
289,855 
285.714 

12.9 

1832  ___  



12  3 

1831  

9.4 

1830  

1829  

9.7 
10.0 

1828  

9.9 

1827  

10  3 

1826  

9.3 

1825  

12.2 

1824 

18  4 

1823  

14.7 

1822  

11.4 

1821  __ 

14.3 

1820  

14.3 

1819 „_ 

17.0 

1818  

24.0 

1817  

34.0 

1816  

26.0 

1815  

29.0 

1814 

21.0 

1813  __ 

15.5 

1812  

12.5 

1811 _ 

10  5 

1810  

15.5 

1809  

16.0 

1808  

16.0 

1807  



19.0 

1806  

21.5 

Tables 

TABI^E  NO.   15— Continued. 


291 


state 

Total 
acreage 

Total 
bales 

Total 
value 

Net 
Wt. 

At. 

price 

1805       _      

304,348 

261 ,044 

222,222 

231,092 

210,526 

153,509 

88,889 

66,667 

48,889 

44,444 

35,556 

35,556 

22,222 

13,333 

8,889 

6,667 

230 
249 
270 
238 
228 
228 
225 

22.0 

1804 

23.0 

1803              

20.0 

1802 

19.0 

1801 

19.0 

1800                             

44.0 

1799 

28.0 

1798                               

225 
225 

44.0 

1797 

89.0 

1796 

225 
225 

225 
225 

226 
225 
225 

84.0 

1795                             

36.5 

1794 

86.5 

1793 

33.0 

1792                         

32.0 

1791 

29.0 

1790 

26.0 

INDEX. 


A  representative  firm,  103 
Arguments  favoring  short 
selling,  criticised,  126 
Arithmetic  of  cotton,  13  8 
Abbreviations,  192 
Arbitrators,         Arbitration, 

204 
Average  price,  to  find,  214 

Problems,   214 
American-German    weights, 

260 
Analysis    cotton     exchange 

business,   76 
Agreements,  194 
Botanical    characteristics,  3 
Business,  cotton  exchanges 

analyzed,   7  6 
Bucket  shops,   80 

Contracts,    82 

Origin   of,    85 
Buying  spot  cotton,   102 
Basic    cotton    calculations, 

192 
Broker,   Brokerage,   200 
Bill  of  Lading,  202 

Through,    203 

Port,  204 
Cotton,   1 

American-Western,   4 

Brazilian,    11 

Peru,   13 

Mexico,  14 

British   India,    15 

Egypt,    18 

Russia,   22 

China,  23 

Japan,   24 

British  N.   Borneo,  28 
Area  of  the  world,  29 

Tin  i ted  States,  30 

Sea-Island,  6 
Long  staple  upland,   8 


Short  staple  western,  10 

Other  Countries,  25 
Classification,    35 

Middling,   37 

Samples  for  use,  40 

Dry,   43 

Standards,    46 

Staple,    4  6 
Committee  spot  quotations, 
54 

Concentration,   111 

Guarantees,  116 

Long,    192 

Short,   193 

Spot,   192 

Bear,    193 

Bull,   193 

Point,   194 

Market  opens,   194 

Market  closes,   194 

Futures,   194 

Contracts,  194 

Margins,    195 

Premiums,  195 

Discounts,  196 

Parity,  197 

Hedging,    197 

Bender,    10 

Straddles,  198 

Scalpers,  198 

Splits,   198 

Flat,   198 

Factors,   200 

Invoice,    201 

Quotation  calculations 
for  basic  price,  265 
Commissions,  Exchange,  7  8 
Contributory  Territory,  104 
Central  buying  points,  117 
Common   fractions,   156 

Decimal  equivalents,  157 
Checks  and  drafts,   239 


Indbx 


293 


Class  marks,   116 
Cotton  wrappings,  130 
Consular  reports,   133 
Cotton  terms,  192 
Comparative     values     with 

foreign  monies,   271 
Dry  cotton,    43 
Differences,  51 
Decimal  fractions,  139 

Comparisons,  141 

Addition,    142 

Subtraction,   146 

Multiplication,    148 

Division,    150 
Drafts,    202 

Sight,    239-243 

To   find   cost  of,   247 

Time,    239-246 

To  find  cost  of,    247 
Factors,   200 
Foreign  Exchange,   252 
Early  experiments,   31 
Exchange,     market     quota- 
tions, 60 
Exchanges,   63 

Places  of,  64 

Origin  of,  66 

History  of,  66 

Contracts,  N.  Y.,  74 

Contracts  N.  O.,  7  5 

Commission,    78 

Transactions   alleged   le- 
gitimate, 86 

Contract  basis,  87 

Quotations,    60 
Exchange,  240 

Course  of,  241 

Bills  of,   241 

Domestic,    240,    242 

Foreign,    240 

Indirect,    250 

On   England,   255 

On   France,  257 

On  Germany,    258 

Intrinsic,   252 

Par  of,   252 

Foreign,    252 

Commercial,  252 
G^ossypium,  Barbadense,  3-6 

Herbaceum,   3 


Hirsutum,  3-5 
Arboreum,  3 
Peruvianium,   3-13 
Grades  tenderable,  50 
Characters   and    Initials, 
206 

German-American    weights, 
262 

History,   1 

Hurried    harvesting,    43 

How    cotton    markets    are 

'   made,   56 
Hedging  future   cotton,   91 

Spot  cotton,  91 
How  to  buy  or  sell  a  future 

contract,  96 
Invoice,  201 

Long   stapled    upland,    8 
Lower    grades    to    classify 

more  difficult,   4  4 
Middling  cotton,   37 
Market  opens,   194 

Closes,  194 
Metric   measurements,    260 
Mint   valuations,    253-282 
No  mechanical   means   for, 
37 

Cotton   classification,    35 
Plating,     intentional     con- 
demned,  42 
Premium  values,  44 
Problems  involving  the  use 
of— 

$0.01,   159 

$0,005,   165 

$0.0025,   171 

$0.00125,    177 

$0.000625,   171 

$0.0003125,   187 
Points,    155 
Quotation  committee — 

Houston,  266 

Galveston,   266 

Memphis,   266 

Little  Rock,  266 

Augusta,  267 

Savannah,  268 
Relative  grades,   48 


294 


Index 


Revision  committee,  N.  Y., 

53 
N.  O.,   54 
Ring,    57 

Trading,  58 
Reclamations,    201 
Requisites,  205 
Round  bales,   137 
Spinning  values,  7 
Sea-Island  cotton,   6 
Short  stapled  western,  10 
Standards  of  the  exchanges 

of  the  United   States, 

84 
Staple  cotton,  4  6 
Secretary  of  the  exchanges, 

56 
Spot  house  refuge,   101 
Short    selling    spot    cotton, 

118 
Straddles,  198 
Spreads,    198 
Splits,  198 

Shipper's  order,  notify,  198 
Samples    for    classification, 

40 


Tenderable  grades,   50 

Table 

1,   143 

Table 

2,    144 

Table 

3,    146 

Table 

4,    155 

Table 

5,    156 

Table 

6,    157 

Table 

7,    253 

Table 

8,   261 

Table 

9,    262 

Table 

10,    273 

Table 

11,    284 

Table 

12,    285 

Table 

13,    287 

Table 

14,    288 

Table 

15,    289 

Terms,  192 

To  find  the  total  value  of 
different     grades    and 
prices,    208 
To  find  average  price — 

1st  process,   214 

2nd   process,    217 

3rd   process,   2  21 

4th  process,   228 
Tree   cotton,    12 


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